A  TREATISE 


POLITICAL   ECONOMY; 


PRODUCTION,   DISTRIBUTION,  AND    CONSUMPTION 


WEALTH. 


BY  JEAN-BAPTISTE  SAY. 


TRANSLATED   FROM   THE   FOURTH   EDITION   OF   THE   FRENCH, 

BY    C.    R.    PRINSEP,   M.  A. 

WITH  NOTES  BY  THE  TRANSLATOR. 


NEW   AMERICAN   EDITION. 

CONTAINING    A  TRANSLATION  OF  THE  INTRODUCTION,  AND  ADDITIONAL   NOTES. 

BY    CLEMENT   C.   DIDDLE,    LL.D 

MEMBER    Of  THE   AMERICAN  PHILOSOPHICAL   SOCIETY. 


PHILADELPHIA: 

J.  B.  LIPPINCOTT   &    CO. 

1855. 


Entered  according  to  the  act  of  Congress,  in  the  year  1832,  by  JOHN  GRIOG, 
in  the  office  of  the  clerk  of  the  district  court  of  the  eastern  district  of  Penn- 
sylvania. 


ADVERTISEMENT 

BY 

THE  AMERICAN  EDITOR, 

TO  THE  SIXTH  EDITION. 


A  NEW  edition  of  this  translation  of  the  popular  treatise  of  M.  Say  having 
oeen  called  for,  the  five  previous  American  editions  being  entirely  out  of 
print,  the  editor  has  endeavoured  to  render  the  work  more  deserving  of 
the  favour  it  has  received,  by  subjecting  every  part  of  it  to  a  careful  re- 
vision. As  the  translation  of  Mr.  Prinsep  was  made  in  the  year  1821, 
from  an  earlier  edition  of  the  original  treatise,  namely,  the  fourth,  which 
had  not  received  the  last  corrections  and  improvements  of  the  author, 
wherever  an  essential  principle  had  been  involved  in  obscurity,  or  an 
error  had  crept  in,  which  had  been  subsequently  cleared  up  and  removed, 
the  American  editor  has,  in  this  impression,  reconciled  the  language  of  the 
text  and  notes  to  the  fifth  improved  edition,  published  in  1826,  the  last  which 
M.  Say  lived  to  give  to  the  world.  It  has  not,  however,  been  deemed 
necessary  to  extend  these  alterations  in  the  translation  any  further  than 
to  the  correction  of  such  discrepancies  and  errors  as  are  here  alluded  to ; 
and  the  editor  has  not  ventured  to  recast  the  translation,  as  given  by  Mr. 
Prinsep,  merely  with  a  view  to  accommodate  its  phraseology,  in  point 
of  neatness  of  expression  or  diction,  to  the  last  touches  of  the  author. 
The  translation  of  Mr.  Prinsep,  the  editor  must  again  be  permitted  to 
observe,  has  been  executed  with  sufficient  fidelity,  and  with  considerable 
spirit  and  elegance ;  and  in  his  opinion  it  could  not  be  much  improved  by 
even  remoulding  it  after  the  last  edition.  The  translation  of  the  introduc- 
tion, given  by  the  present  editor,  has  received  various  verbal  corrections ; 
and  such  alterations  and  additions  as  were  introduced  by  the  author  into 
his  fifth  edition,  will  now  be  found  translated. 

It  is,  moreover,  proper  to  state,  that  at  the  suggestion  of  the  American 
proprietors  and  publishers  of  this  edition  of  the  work,  the  French  moneys, 
weights  and  measures,  throughout  the  text  and  notes,  have  been  conven- 
ed into  the  current  coins,  weights  and  measures  of  the  United  Slates , 
wnen  the  context  strictly  required  it  by  a  rigorous  reduction,  and  when 
merely  assumed  as  a  politico-arithmetical  illustration,  by  a  simple  approx- 
imation to  a  nearly  equivalent  quantity  of  our  own  corns,  weights  or 


IV  ADVERTISEMENT  TO  THE  SIXTH  EDITION. 

measures.  This  has  been  done  to  render  the  work  as  extensively  useful 
as  possible,  and  will,  no  doubt,  make  the  author's  general  principles  and 
reasonings  more  easily  comprehended,  as  well  as  more  readily  remem- 
bered, by  the  American  student  of  political  economy. 

Many  new  notes,  it  will  be  seen,  have  been  added  by  the  American 
editor,  in  further  illustration  or  correction  of  those  portions  of  the  text 
which  still  required  elucidation.  The  statistical  data  now  incorporated 
in  these  notes,  have  been  brought  down  to  the  most  recent  period,  both 
in  this  country  and  in  Europe.  No  pains  have  been  spared  in  getting 
access  to  authentic  channels  of  information,  and  the  American  editor 
trusts  that  the  present  edition  will  be  found  much  improved  throughout. 

The  death  of  M.  Say  took  place,  in  Paris,  during  the  third  week  of  No- 
vember, 1832,  on  which  occasion,  according  to  the  statements  in  the  French 
journals,  such  funeral  honours  were  paid  to  his  memory  as  are  due  to 
eminent  personages,  and  Odilon-Barrot,  de  Sacy,  de  Laborde,  Blanqui, 
and  Charles  Dupin,  his  distinguished  countrymen  and  admirers,  pro- 
nounced discourses  at  the  interment  in  the  cemetery  of  Pere  Lachaise. 

The  account  of  his  decease,  here  subjoined,  is  taken  from  the  London 
Political  Examiner  of  the  25th  of  November,  1832,  and  is  from  the  pen 
of  its  able  editor,  Mr.  Fonblanque,  one  of  the  most  powerful  political 
writers  in  England.  Mr.  Fonblanque,  it  appears,  was  the  personal  friend, 
as  well  as  the  warm  admirer,  of  the  genius  and  writings  of  M.  Say,  and 
was  well  qualified  to  appreciate  his  high  intellectual  endowments,  his 
profound  knowledge  and  political  wisdom,  his  manly  independence,  his 
mild  yet  dignified  consistency  of  character,  and  above  all,  his  rare  and 
shining  private  virtues.  There  hardly  could  be  a  more  interesting  and 
instructive  task  assigned  to  the  philosophical  biographer,  than  a  faithful 
portraiture  of  the  life  and  labours  of  this  illustrious  man,  which  were  so 
ardently  and  efficiently  devoted  to  the  advancement  of  the  happiness  and 
prosperity  of  his  fellow-men.  Perhaps  the  writings  of  no  authors,  how- 
ever great  their  celebrity  may  be,  are  exerting  a  more  powerful  and  en- 
during influence  on  the  well-being  of  the  people  of  Europe  and  America, 
than  those  of  Adam  Smith,  and  John  Baptiste  Say. 

"  France  has  this  week  lost  another  of  her  most  distinguished  writers 
and  citizens,  the  celebrated  political  economist,  M.  Say.  The  invaluable 
branch  of  knowledge  to  which  the  greatest  of  his  intellectual  exertions 
were  devoted,  is  indebted  to  him,  amongst  others,  for  those  great  and 
all-pervading  truths  which  have  elevated  it  to  the  rank  of  a  science ;  and 
to  him,  far  more  than  to  any  others,  for  its  popularization  and  diffusion. 
Nor  was  M.  Say  a  mere  political  economist ;  else  had  he  been  necessarily 
a  bad  one.  He  knew  that  a  subject  so  '  immersed  in  matter,'  (to  use  the 
fine  expression  of  Lord  Bacon,)  as  a  nation's  prosperity,  must  be  looked 
at  on  many  sides,  in  order  to  be  seen  rightly  even  on  one.  M.  Say  was 
one  of  the  most  accomplished  minds  of  his  age  and  country.  Though  he 
liad  given  his  chief  attention  to  one  particular  aspect  of  human  affairs, 
all  their  aspects  were  interesting  to  him ;  not  one  was  excluded  from  his 


ADVERTISEMENT  TO  THE  SIXTH  EDITION.  v 

survey.  His  private  life  was  a  model  of  the  domestic  virtues.  From  the 
time  when,  with  Chamfort  and  Ginguene',  he  founded  the  Decade  Philo- 
sophique,  the  first  work  which  attempted  to  revive  literary  and  scientific 
pursuits  during  the  storms  of  the  French  Revolution — alike  when  courted 
by  Napoleon,  and  when  persecuted  by  him  (he  was  expelled  from  the 
Tribunat  for  presuming  to  have  an  independent  opinion);  unchanged 
equally  during  the  sixteen  years  of  the  Bourbons,  and  the  two  of  Louis 
Philippe — he  passed  unsullied  through  all  the  trials  and  temptations  which 
have  left  a  stain  on  every  man  of  feeble  virtue  among  his  conspicuous 
contemporaries.  He  kept  aloof  from  public  life,  but  was  the  friend  and 
trusted  adviser  of  some  of  its  brightest  ornaments;  and  few  have  contri- 
buted more,  though  in  a  private  station,  to  keep  alive  in  the  hearts  and  in 
the  contemplation  of  men,  a  lofty  standard  of  public  virtue.  If  this  feeble 
testimony,  from  one  not  wholly  unknown  to  him,  should  meet  the  eye 
of  any  onewholoved  him,  may  it,  in  so  far  as  such  things  can,  afford  tnat 
comfort  under  the  loss,  which  can  be  derived  from  the  knowledge  that 
others  know  and  feel  all  its  irreparableness !" 

C.  C.  B. 
PHILADELPHIA,  December,  1834. 


1* 


ADVERTISEMENT 

BY 

THE  AMERICAN  EDITOR 

TO  THE  FIFTH  EDITION. 


No  work  upon  political  economy,  since  the  publication  of  Dr.  Adam 
Smith's  profound  and  original  Inquiry  into  the  Nature  and  Causes  of  the 
Wealth  of  Nations,  has  attracted  such  general  attention,  and  received 
such  distinguished  marks  of  approbation  from  competent  judges,  as  the 
"  Traite  D'Economie  Politique,"  of  M.  Say.  It  was  first  printed  in  Paris 
in  the  year  1803;  and,  subsequently,  has  passed  through  five  large 
editions,  that  have  received  various  corrections  and  improvements  from 
the  author.  Translations  of  the  work  have  been  made  into  the  German, 
Spanish,  Italian,  and  other  languages ;  and  it  has  been  adopted  as  a  text- 
book in  all  the  universities  of  the  continent  of  Europe,  in  which  this  new 
but  essential  branch  of  liberal  education  is  now  taught.  The  four 
former  American  editions  of  this  translation  have  also  been  introduced 
into  many  of  the  most  respectable  of  our  own  seminaries  of  learning. 

It  is  unquestionably  the  most  methodical,  comprehensive  and  best 
digested  treatise  on  the  elements  of  political  economy,  that  has  yet  been 
presented  to  the  world.  It  exhibits  a  clear  and  systematical  view  of  all 
the  solid  and  important  doctrines  of  this  very  extensive  and  difficult 
science,  unfolded  in  their  proper  order  and  connexion.  In  the  establish- 
ment of  his  principles,  the  author's  reasonings,  with  but  few  exceptions, 
are  logical  and  accurate,  delivered  with  distinctness  and  perspicuity,  and 
generally  supported  by  the  fullest  and  most  satisfactory  illustrations.  A 
rigid  adherence  to  the  inductive  method  of  investigation,  in  the  prosecu- 
tion of  almost  every  part  of  his  inquiry,  has  enabled  M.  Say  to  effect  a 
nearly  complete  analysis  of  the  numerous  and  complicated  phenomena 
of  wealth,  and  to  enunciate  and  establish,  with  all  the  evidence  of  de- 
monstration, the  simple  and  general  laws  on  which  its  production,  dis- 
tribution, and  consumption  depend.  The  few  slight  and  inconsiderable 
errors  into  which  the  author  has  fallen,  do  not  affect  the  general  sound- 
ness and  consistency  of  his  text,  although,  it  is  true,  they  are  blemishes 
that  thus  far  darken  and  disfigure  it.  But  these  are  of  rare  occurrence, 
and  the  false  conclusions  involved  in  them  may  be  easily  detected  and 
refuted  by  recurrence  to  the  fundamental  principles  of  the  work,  with 
which  they  manifestly  are  at  variance,  and  contradict. 


ADVERTISEMENT  TO  THE  FIFTH  EDITION.  yii 

The  foundation  of  the  science  of  political  economy  was  firmly  laid, 
and  the  only  successful  method  of  conducting  our  inquiries  in  it  pointed 
out  and  exemplified  by  the  illustrious  author  of  the  Wealth  of  Nations  ; 
a  number  of  its  leading  doctrines  were  also  developed  and  explained  by 
other  eminent  writers  on  the  continent  of  Europe,  who,  about  the  same 
time,  were  engaged  in  investigating  the  nature  and  causes  of  social 
riches.  But  neither  the  scientific  genius  and  penetrating  sagacity  of  the 
former,  nor  the  profound  acuteness  and  extensive  research  of  many  of 
the  latter,  enabled  them  to  obtain  a  complete  discovery  of  all  the  actual 
phenomena  of  wealth,  and  thus  to  effect  an  entire  solution  of  the  most 
abstruse  and  difficult  problems  in  political  economy;  those,  namely, 
which  demonstrate  the  true  theory  of  value,  and  unfold  the  real  sources 
of  production.  Aided,  however,  by  the  valuable  materials  collected  and 
arranged  by  the  labours  of  his  distinguished  predecessors,  here  referred 
to,  and  proceeding  in  the  same  path,  our  author,  with  the  closeness  and 
minutenes  of  attention  due  to  this  important  study,  has  succeeded  in 
examining  under  all  their  aspects,  the  general  facts  which  the  ground- 
work of  the  science  presents,  and  by  rejecting  and  excluding  the  acci- 
dental circumstances  connected  with  them,  has  thus  established  its  ulti- 
mate laws  or  principles. 

Accordingly,  by  pursuing  the  inductive  method  of  investigation,  M. 
Say,  in  the  most  strict  and  philosophical  manner,  has  deduced  the  true 
nature  of  value,  traced  up  its  origin,  and  presented  a  clear  and  accurate 
explanation  of  its  theory.  His  definition  of  wealth,  therefore,  is  more 
precise  and  correct  than  that  of  any  of  his  predecessors  in  this  inquiry. 
The  agency  of  human  industry,  which  "Dr.  Adam  Smith,  not  with  the 
strictest  propriety,  denominated  labour,  the  important  operation  of  natu- 
ral powers,  especially  land,  and  the  functions  of  capital,  as  well  as  the 
relative  services  of  these  three  instruments,  and  the  modes  in  which  they 
all  concur  in  the  business  of  production,  were  first  distinctly  and  fully 
pointed  out  and  illustrated  by  our  author.  In  this  way  he  successfully 
unfolded  the  manner  in  which  production  is  carried  on,  and  imparts  value 
to  the  products  of  agriculture,  manufactures,  and  commerce.  By,  also, 
distinguishing  reproductive  from  unproductive  consumption,  M.  Say  has 
exhibited  the  exact  nature  of  capital,  and  its  consequent  important 
agency  in  production,  and  thus  has  shown  why  economy  is  a  source  of 
national  wealth.  Such  are  this  author's  peculiar  and  original  specula- 
tions, the  fruits  of  deep  and  patient  meditation  on  the  phenomena  ob- 
served. The  elementary  principles  derived  from  them,  with  others  pre- 
viously ascertained,  he  has  combined  into  one  harmonious,  consistent, 
and  beautiful  system. 

But  a  few  of  these  solid  and  well-established  positions  have  been  criti 
cised  and  objected  to  as  inconclusive  and  inadmissible,  by  Mr.  Ricardo 
and  by  Mr.  Malthus,  two  of  the  ablest  and  most  distinguished  political 
economists  among  our  author's  contemporaries.  Other  doctrines  in  rela- 
tion to  the  nature  and  origin  of  value  have  been  advanced  by  them,  and 


viii  ADVERTISEMENT  TO  THE  FIFTH  EDITION. 

with  so  much  plausibility  too,  that  some  of  the  most  acute  reasoners  of 
the  present  day  have  not  been  sufficiently  on  their  guard  against  the 
fallacies  involved  in  them.  The  mathematical  cast  given  to  their  reason- 
ings by  these  writers,  has  captivated  and  led  astray  the  understandings 
of  intelligent  and  sagacious  readers,  and  induced  them  to  adopt,  as 
scientific  truths,  what,  when  properly  investigated  and  analyzed,  are 
found  to  be  merely  specious  hypotheses.  Hence  it  is  that  a  theory  of 
value,  purely  gratuitous,  has  been  extolled  in  one  of  the  principal  literary 
journals  of  Great  Britain,  as  being  "no  less  logical  and  conclusive  than 
it  was  profound  and  important."  Our  author,  accordingly,  deemed  it 
necessary  to  examine  the  arguments  brought  forward  in  support  of  these 
views  of  his  opponents,  in  order  to  test  their  soundness  and  accuracy, 
and  to  submit  his  own  principles  to  a  further  review,  that  he  might  be- 
come satisfied  that  the  conclusions  he  had  deduced  from  them  had  not 
been  in  any  manner  invalidated. 

In  the  notes  appended  by  M.  Say  to  the  French  translation  of  Mr. 
Ricardo's  Principles  of  Political  Economy  and  Taxation,  the  reader  will 
find  what  the  editor  deems  a  masterly  and  conclusive  refutation  of  the 
theoretical  errors  of  this  author.  M.  Say's  strictures  upon  the  twentieth 
chapter  of  the  work,  entitled,  "  Value  and  Riches,  their  Distinctive  Pro- 
perties," are  in  his  opinion  decisive  and  unanswerable.  The  fallacies  con- 
tained in  Mr.  Ricardo's  theory  of  value,  which,  the  editor  thinks,  may 
be  traced  to  an  anxiety  to  give  consistency  to  the  loose  and  inaccurate 
proposition  of  Dr.  Adam  Smith,  that  exchangeable  value  is  entirely  de- 
rived from  human  labour,  are  there  fully  exposed,  and  his  whole  train 
of  reasoning,  in  connection  with  it,  shown  to  rest  upon  an  unwarrantable 
assumption.  It  must,  however,  be  conceded  that  Mr.  Ricardo  was  an 
intrepid  and  uncompromising  reasoner,  who  always  proceeded  in  the 
most  direct  and  fearless  mannerfrom  his  premises  to  the  conclusion.  But 
not  uniting  with  the  strongest  powers  of  reasoning,  a  capacity  for  ana- 
lytical subtilty,  he  sometimes  did  not  perceive  verbal  ambiguities  in  the 
formation  of  his  premises,  and  transitions  in  the  signification  of  his 
terms  in  the  conduct  of  his  argument,  which,  in  these  instances,  vitiated 
his  conclusions.  The  fundamental  errors  into  which  he  has  fallen,  accord- 
ingly, do  not  arise  from  any  want  of  strictness  in  his  deductions,  but 
from  undue  generalizations  and  perversions  of  language.  In  M.  Say's 
Letters  to  Mr.  Malthus,  which  have  been  translated  by  Mr.  Richfer,  the 
points  at  issue  between  these  two  eminent  political  economists  are  dis- 
cussed in  the  most  luminous,  impartial,  and  satisfactory  manner ;  and  by 
all  candid  and  unprejudiced  critics  must  be  considered  as  bringing  the 
controversy  to  a  close. 

It  is  not  his  intention,  nor  would  it  be  proper  on  this  occasion,  for  the 
editor  to  enter  further  into  the  merits  of  the  controversial  writings  of  our 
author.  Any  dispassionate  inquirer,  who  will  take  the  pains  carefully  to 
leview  the  whole  ground  in  dispute,  will,  he  thinks,  find  that  the  disqui- 
sitions referred  to  contain  a  triumphant  vindication  of  such  of  the  author's 


ADVERTISEMENT  TO  THE  FIFTH  EDITION.  1X 

general  principles  as  had  been  assailed  by  his  ingenious  opponents. 
Whenever  the  study  of  the  science  of  political  economy  shall  be  more 
generally  cultivated  as  an  essential  branch  of  early  education,  most  of 
the  abstruse  questions  involved  in  the  controversies  which  now  divide 
the  writers  on  this  subject  will  be  brought  to  a  conclusion ;  the  accession 
of  useful  knowledge  it  will  occasion  will  more  effectually  eradicate  the 
prejudices  which  have  given  birth  to  these  disputes  and  misconceptions, 
than  any  direct  argumentative  refutation. 

The  great  merits  of  this  treatise  on  political  economy  are  now  begin- 
ning to  be  well  known  and  properly  estimated  by  that  class  of  readers 
who  take  a  deep  interest  in  the  progress  of  a  science,  which  "  aims  at 
the  improvement  of  society,"  as  DUGALD  STEWART  so  truly  remarks,  "  not 
by  delineating  plans  of  new  constitutions,  but  by  enlightening  the  policy 
of  actual  legislators ;"  a  science,  therefore,  with  the  right  understanding 
of  whose  principles,  the  welfare  and  happiness  of  mankind  are  intimately 
connected. 

In  alluding  to  this  admirable  work  of  M.  Say,  Mr.  Ricardo  remarks, 
"  that  its  author  not  only  was  the  first,  or  among  the  first,  of  continental 
writers,  who  justly  appreciated  and  applied  the  principles  of  Smith,  and 
who  has  done  more  than  all  other  continental  writers  taken  together,  to 
recommend  the  principles  of  that  enlightened  and  beneficial  system  to 
the  nations  of  Europe ;  but  who  has  succeeded  in  placing  the  science  in 
a  more  logical,  and  more  instructive  order ;  and  has  enriched  it  by  seve- 
ral discussions,  original,  accurate,  and  profound." 

The  English  public  has  for  some  time  been  in  possession  of  the  present 
excellent  translation  of  this  treatise  by  Mr.  Prinsep ;  the  first  edition  of 
which  was  published  in  London  in  the  spring  of  1821.  It  is  executed 
with  spirit,  elegance,  and  general  fidelity,  and  is  a  performance,  in  every 
respect,  worthy  of  the  original.  It  is  here  given  to  the  American  reader 
without  any  material  alteration. 

In  various  notes  which  the  English  translator  has  thought  proper  to 
subjoin  to  his  edition  of  the  text,  he  has  wasted  much  ingenuity  in  en- 
deavouring to  overthrow  some  of  the  author's  leading  principles,  which, 
notwithstanding  these  attacks,  are  as  fixed  and  immutable  as  the  truths 
which  constitute  their  basis.  Had  Mr.  Prinsep  more  thoroughly  studied 
M.  Say's  profound  theoretical  views  on  the  subject  of  value,  and  had  he, 
also,  made  himself  acquainted,  which  it  nowhere  appears  that  he  has 
done,  with  the  powerful  and  victorious  defence  of  these  doctrines,  con- 
tained in  the  notes  on  Mr.  Ricardo's  work,  and  in  the  letters  to  Mr. 
Malthus,  already  referred  to,  he  perhaps  might  have  discovered,  that  they 
are  the  ultimate  generalizations  of  facts,  which,  agreeably  to  the  most 
legitimate  rules  of  philosophizing,  the  author  was  entitled  to  lay  down 
as°general  laws  or  principles.  At  all  events,  Mr.  Prinsep  should  not  have 
ventured  upon  an  attack  on  these  first  principles  of  the  science  of  Doliti- 
cal  t-conomy,  without  this  previous  examination. 

Such,  therefore,  of  these  notes  of  the  English  translator  as  are  in  oppo- 
sition to  the  well-established  elements  of  the  science,  and  have  no  other 


X  ADVERTISEMENT  TO  THE  FIFTH  EDITION. 

support  than  the  hypothesis  of  Mr.  Ricardo  and  Mr.  Malthus,  have  been 
entirely  omitted;  the  American  editor  not  deeming  himself  under  any 
obligation  to  give  currency  to  errors,  which  would  perpetually  interrupt 
and  distract  the  attention  of  the  reader  in  a  most  abstruse  and  difficult 
inquiry.  Other  notes  of  the  translator,  which  contain  interesting  and 
valuable  illustrations  of  other  general  principles  of  the  work,  drawn 
from  the  actual  state  of  Great  Britain  and  her  colonies,  have  been  retain- 
ed in  this  edition,  as  appropriate  and  useful.  The  translator's  remarks 
on  the  pernicious  character  and  tendency  of  the  restrictive  and  prohibi- 
tive policy,  are  particularly  worthy  of  regard,  confirming  as  they  most 
fully  do,  on  this  subject,  all  the  important  conclusions  of  the  author.  The 
folly  x>f  attempting,  either  by  extraordinary  encouragements,  to  attract 
towards  some  branches  of  production  a  larger  share  of  capital  and  in- 
dustry than  would  be  naturally  employed  in  them,  or  by  uncommon 
restraints  forcibly  to  divert  from  others  a  portion  of  the  capital  and  in- 
dustry that  would  otherwise  be  invested  in  them,  is  at  last  beginning  to 
be  understood. 

The  restrictive  system,  or  that  which  by  means  of  legislative  enact 
ments  endeavours  to  give  a  particular  direction  to  national  capital  and 
industry,  derived  its  whole  support  from  the  assumption  of  positions 
now  generally  admitted  to  be  gratuitous  and  unfounded,  namely,  that  in 
trade  whatever  is  gained  by  one  nation  must  necessarily  be  lost  by 
another,  that  wealth  consists  exclusively  of  the  precious  metals,  and  con- 
sequently, that  in  all  sales  of  commodities,  the  great  object  should  be  to 
obtain  returns  in  gold  and  silver.  In  Europe  these  erroneous  opinions 
have  now,  for  some  time,  been  relinquished  by  political  economists  of  all 
the  various  schools,  some  of  whom  yet  differ  and  dispute  respecting  a 
few  of  the  more  recondite  and  ultimate  elements  of  the  science.  In  the 
whole  range  of  inquiry  in  political  economy,  perhaps  there  is  not  a  single 
proposition  better  established,  or  one  that  has  obtained  a  more  universal 
sanction  from  its  enlightened  cultivators  in  every  country,  than  the  libe- 
ral doctrine,  that  the  most  active,  general,  and  profitable  employments 
are  given  to  the  industry  and  capital  of  every  people,  by  allowing  to 
their  direction  and  application  the  most  perfect  freedom,  compatible  with 
the  security  of  property.  This  fundamental  position  of  political  economy, 
and  the  various  principles  that  flow  from  it  as  corollaries,  were  first  sys- 
tematically developed,  explained,  and  taught  by  the  great  father  of  the 
science,  Dr.  Adam  Smith  ;  although  glimpses  of  the  same  important  truth 
had  previously,  and  about  the  same  time,  reached  the  minds  of  a  few 
eminent  individuals  in  other  parts  of  the  world.  "  The  most  effectual 
plan  for  advancing  a  people  to  greatness,"  says  Dr.  Smith,  "  is  to  main- 
tain tnat  order  of  things  which  nature  pointed  out;  by  allowing  every 
man,  as  long  as  he  observes  the  rules  of  justice,  to  pursue  his  own  inter- 
est in  his  own  way,  and  to  bring  both  his  industry  and  his  capital  into 
the  freest  competition  with  those  of  his  fellow-citizens."  Animated  by  a 
like  desire  to  promote  the  improvement  and  happiness  of  mankind,  with 
that  which  actuated  the  author  of  the  Wealth  of  Nations,  the  most  pro- 


ADVERTISEMENT  TO  THE  FIFTH  EDITION.  xj 

tound  inquiries  among  his  successors  embraced  his  enlarged  and  benevo- 
lent views,  as  the  only  certain  means  of  increasing  the  general  prosperity, 
and  eloquently  maintained  and  enforced  them.  The  doctrines  of  the 
freedom  of  trade  and  the  rights  of  industry,  were  vindicated  and  taught 
by  all  the  distinguished  British  political  economists ;  namely,  by  Dugald 
Stewart,  Ricardo,  Malthus,  Torrens,  Homer,  Huskisson,  Lauderdale, 
Bentham,  Mills,  Craig,  Lowe,  Tooke,  Senior,  Bowring,  M'Culloch,  and 
Whatley ;  and,  on  the  continent  of  Europe,  by  authors  as  celebrated, 
by  Say,  Droz,  Sismondi,  Storch,  Garnier,  Destutt-Tracy,  Ganilh,  Jovella- 
nos,  Sartorius,  Q,ueypo,  Leider,  Von  Schlozer,  Kraus,  Weber,  Muller, 
Scarbeck,  Pechio,  and  Gioja. 

"  Under  a  system  of  perfectly  free  commerce,"  says  Mr.  Ricardo, 
"  each  country  naturally  devotes  its  capital  and  labour  to  such  employ- 
ments as  are  most  beneficial  to  each.  This  pursuit  of  individual  advan- 
tage is  admirably  connected  with  the  universal  good  of  the  whole.  By 
stimulating  industry,  by  rewarding  ingenuity,  and  by  using  most  effica- 
ciously the  powers  bestowed  by  nature,  it  distributes  labour  most  effec- 
tively and  most  economically :  while  by  increasing  the  general  mass  of 
productions,  it  diffuses  general  benefit,  and  binds  together  by  one  com- 
mon tie  of  interest  and  intercourse,  the  universal  society  of  nations 
throughout  the  civilized  world.  It  is  this  principle  which  determines  that 
wine  shall  be  made  in  France  and  Portugal,  that  corn  shall  be  grown  in 
America  and  Poland,  and  that  hardware  and  other  goods  shall  be  manu- 
factured in  England." 

Our  own  celebrated  countryman,  Franklin,  too,  with  a  sagacity  and 
force  which  always  characterized  his  intellect,  maintained  and  exempli- 
fied in  his  "  Essay  on  the  Principles  of  Trade,"  what  he  therein  repeat- 
edly called  "  the  great  principle  of  freedom  in  trade."  Even  before  the 
appearance  of  the  Wealth  of  Nations,  he  had  with  almost  intuition  anti- 
cipated some  of  the  most  profound  conclusions  of  the  science  of  political 
economy,  which  other  inquirers  had  arrived  at  only  after  a  patient  and 
laborious  analysis  of  its  phenomena.  The  new  and  generous  commer- 
cial policy  is  not  more  beholden  for  support  and  currency  to  the  argu- 
ments and  illustrations  of  any  of  its  early  expositors,  than  to  the  clear 
and  vigorous  pen  of  the  highly  gifted  American  philosopher.  "  The  ex- 
pressions, Laissez  nous  faire,  and  pas  trop  gouverner,"  which,  to  use 
the  language  of  DUGALD  STEWART,  the  highest  of  all  authorities,  "  com- 
prise in  a  few  words  two  of  the  most  important  lessons  of  political  wis- 
dom, are  indebted  chiefly  for  their  extensive  circulation,  to  the  short  and 
luminous  comments  of  Franklin,  which  had  so  extraordinary  an  influence 
on  public  opinion,  both  in  the  Old  and  New  World."  Nevertheless, 
strange  as  it  may  seem,  by  a  perversion  or  misconception  of  a  few  of 
his  incidental  opinions,  the  name  of  the  first  of  practical  statesmen  lias 
been  invoked,  and  its  authority  employed  among  us,  in  aid  of  a  system 
of  restraints  and  prohibitions  on  commerce,  which  it  was  the  chief  aim 
of  his  politico-economical  writings  to  refute  and  condemn,  as  afike  repug- 
nant to  sound  theory  and  destructive  to  national  prosperity.  Whenever 
American  statesmen  and  legislators  shall  have  as  clear  and  steady  per 


xii  ADVERTISEMENT  TO  THE  FIFTH  EDITION. 

ceptions  as  Franklin  of  the  truth  and  wisdom  of  the  doctrine  of  common 
cial  freedom,  we  may  expect  that  our  national  and  state  codes  will  no 
longer  exhibit  so  many  traces  of  that  empirical  spirit  of  tampering  regu- 
lation which,  instead  of  invigorating  and  quickening  the  development  of 
national  wealth,  only  cramps  and  retards  its  natural  growth.  "  Where 
should  we  expect,"  says  M.  Say,  in  a  letter  to  the  editor,  "  sound  doc- 
trine to  be  better  received  than  amongst  a  nation  that  supports  and  illus- 
trates the  value  of  free  principles,  by  the  most  striking  examples.  The 
old  states  of  Europe  are  cankered  with  prejudices  and  bad  habits ;  it  is 
America  who  will  teach  them  the  height  of  prosperity  which  may  be 
reached  when  governments  follow  the  counsels  of  reason,  and  do  not 
cost  too  much." 

The  preliminary  discourse  has  been  translated  by  the  American  editor, 
and  in  his  editions  of  the  work  restored  to  its  place.  The  editor  must 
confess  that  he  is  at  a  loss  to  account  for  the  omission  by  the  English 
translator  of  so  material  a  part  of  the  author's  treatise  as  this  introduc- 
tion to  his  whole  inquiry.  In  itself  it  is  a  performance  of  uncommon 
merit,  has  immediate  reference  to,  and  sheds  much  light  over,  the  gene- 
ral views  unfolded  in  the  body  of  the  work.  The  nature  and  object  of 
the  science  of  political  economy,  the  only  certain  method  of  conducting 
any  of  our  inquiries  in  it  with  success,  and  the  causes  which  have  hither- 
to so  much  retarded  its  advancement,  are  all  considered  and  pointed  out 
with  great  clearness  and  ability.  The  author  has  also  connected  with  it 
a  highly  interesting  and  instructive  historical  sketch  of  the  progress  of 
this  science  during  the  last  and  present  century,  interspersed  with  nu- 
merous judicious  and  acute  criticisms  upon  the  writings  and  opinions 
of  his  predecessors.  Moreover,  this  discourse,  throughout  every  part, 
Is  deeply  philosophical,  and  well  calculated  to  prepare  the  reader  for  the 
study  on  which  he  is  about  to  enter.  The  editor  has,  therefore,  he  trusts, 
performed  an  acceptable  service  in  putting  the  American  student  in  pos 
session  of  so  important  a  part  of  the  original  work.* 

Notes  have  also  been  subjoined  by  the  American  editor,  for  the  pur 
pose  of  marking  a  few  inconsiderable  errors  and  inconsistencies  into 
which  the  author  has  inadvertently  fallen,  and  of  supplying  an  occasional 
illustration,  drawn  from  other  authors,  of  such  passages  of  the  text 
as  seemed  to  require  further  elucidation  or  correction. 

C.  C.  B. 

PHILADELPHIA,  April,  1832. 

*  The  following  extract  of  a  letter  from  M.  Say,  to  the  American  editor,  it  may  not 
be  improper  to  subjoin,  as  it  contains  the  author's  opinion  of  the  value  he  attaches  to 
the  preliminary  discourse. 

"  Your  translation  and  restoration  of  the  preliminary  discourse  adds,  in  my  eyes,  a 
new  value  to  your  edition.  It  could  only  have  been  from  a  narrow  calculation  of  the 
English  publisher,  that  it  was  omitted  in  Mr.  Prinsep's  translation.  Ought  that  portion 
of  the  work  to  be  deemed  unuseful,  whose  aim  is  to  unfold  the  real  object  of  the  science, 
to  present  a  rapid  sketch  of  its  history,  and  to  point  out  the  only  true  method  of  inves- 
tigating it  with  success  ?  Mr.  George  Prymc,  professor  of  political  economy  in  the 
university  of  Cambridge,  in  England,  makes  this  very  discourse  the  principal  topic  of 
*everal  of  his  first  lectures." 


CONTENTS. 


BOOK  I. 
OF  THE  PRODUCTION  OF  WEALTH. 

ADVERTISEMENT  by  the  American  Editor,  to  the  Sixth  Edition Page  iii 

Advertisement  by  the  American  Editor,  to  the  Fifth  Edition vi 

Introduction rr 

CHAP.  I.  Of  what  i»  to  be  understood  by  the  term  production 61 

II.  Of  the  different  kinds  of  industry,  and  the  mode  in  which  they  concur  in  pro- 

duction       63 

III.  Of  the  nature  of  capital,  and  the  mode  in  which  it  concurs  in  the  business  cf 

production 71 

IV.  Of  natural  agents,  that  assist  in  the  production  of  wealth,  and  specially  of  land  .    74 
V.  On  the  mode  in  which  industry,  capital,  and  natural  agents  unite  in  production.     77 

VI.  Of  operations  alike  common  to  all  branches  of  industry 79 

VII.  Of  the  labour  of  mankind,  of  nature,  and  of  machinery  respectively 85 

VIII.  Of  the  advantages  and  disadvantages  resulting  from  division  of  labour ;  and  of 

the  extent  to  which  it  may  be  carried 90 

IX.  Of  the  different  methods  of  employing  commercial  industry,  and  the  mode  in 

which  they  concur  in  production 99 

X.  Of  the  transformations  undergone  by  capital,  in  the  progress  of  production  ....  105 

XI.  Of  the  formation  and  multiplication  of  capital 109  • 

XII.  Of  unproductive  capital 118 

XIII.  Of  immaterial  products,  or  values  consumed  at  the  moment  of  production 119 

XIV.  Of  the  right  of  property 127 

X'V.  Of  the  demand  or  market  for  products 132 

XVI.  Of  the  benefits  resulting  from  the  quick  circulation  of  money  and  commodities.  140 

XVII.  Of  the  effect  of  governments,  intended  to  influence  production 143 

Sect.  1.  Effect  of  regulations  prescribing  the  nature  of  products 143 

Digression — Upon  what  is  called  the  balance  of  trade 148 

2.  Of  the  effect  of  regulations,  fixing  the  manner  of  production 175 

3.  Of  privileged  trading  companies 183 

4.  Of  regulations  affecting  the  corn  trade 189 

XVIII.  Of  the  effect  upon  national  wealth,  resulting  from  the  productive  efforts  of  pub- 

lic authority 199 

XIX.  Of  colonies  and  their  products 203 

XX.  Of  temporary  and  permanent  emigration,  considered  in  reference  to  national 

wealth 213 

XXI.  Of  the  nature  and  uses  of  money: 

Sect.  1.  General  remarks 217 

2.  Of  the  material  of  money _. .  220 

3.  Of  the  accession  of  value  a  commodity  receives,  by  being  vested  with 

the  character  of  money 224 

4.  Of  the  utility  of  coinage  ,•  and  of  the  charge  of  its  execution 228 

5.  Of  alterations  of  the  standard-money 234 

6.  Of  the  reason  why  money  is  neither  a  sign  nor  a  measure 240 

7.  Of  a  peculiarity,  that  should  be  attended  to,  in  estimating  the  sams 

mentioned  in  history 248 

8.  Of  the  absence  of  any  fixed  ratio  of  value  between  one  metal  and 

another 254 

9.  Of  money  as  it  ought  to  be 256 

10.  Of  a  copper  and  brass  metal  coinage 261 

11.  Of  the  preferable  form  of  coined  money 262 

12.  Of  the  party  on  whom  the  loss  of  coin  by  wear  should  properly  fall. . .  263 

XXII.  Of  signs  or  representatives  of  money : 

Sect  ].  Of  bills  of  exchange  and  letters  of  credit 265 

2.  Of  banks  of  deposite 268 

3.  Of  banks  of  circulation  or  discount,  and  of  bank  notes,  or  convertible 


paper 


270 


4.  Of  paper-money 280 


CONTENTS. 

BOOK  II. 

'   OF  THE  DISTRIBUTION  OF  WEALTH. 

I.  Of  the  basis  of  value,  and  of  supply  and  demand 284 

II.  Of  the  sources  of  revenue 292 

III.  Of  real  and  relative  variation  of  price 297 

IV.  Of  nominal  variation  of  price,  and  of  the  peculiar  value  of  bullion  and  of  coin  306 
V.  Of  the  manner  in  which  revenue  is  distributed  amongst  society 314 

VL  Of  what  branches  of  production  yield  the  most  liberal  recompense  to  productive 

agency 321 

VII  Of  the  revenue  of  industry : 

Sect  1.  Of  the  profits  of  industry  in  general 324 

2.  Of  the  profits  of  the  man  of  science 228 

3.  Of  the  profits  of  the  master-agent  or  adventurer  in  industry 229 

4.  Of  the  profits  of  the  operative  labourer 332 

5.  Of  the  independence  accruing  to  the  moderns  from  the  advancement 

of -industry 340 

VIII.  Of  the  revenue  of  capital :   . 

Sect.  1.  Of  loans  at  interest 343 

2.  Of  the  profit  of  capital 354 

3.  Of  the  employments  of  capital  most  beneficial  to  society 357 

IX.  Of  the  revenue  of  land : 

Sect  1.  Of  the  profit  of  landed  property 359 

2.  Of  rent ....  365 

X.  Of  the  effect  of  revenue  derived  by  one  nation  from  another 368 

XI  Of  the  mode  in  which  the  quantity  of  the  product  affects  population : 

Sect  1.  Of  population,  as  connected  with  political  economy 371 

2.  Of  the  influence  of  the  quality  of  a  national  product  upon  the  local  dis- 
tribution of  the  population 381 


BOOK  III. 

OF  THE  CONSUMPTION  OF  WEALTH. 

I.  Ol  iiie  different  kinds  of  consumption 387 

II.  Of  the  effect  of  consumption  in  general 391 

III.  Of  the  effect  of  productive  consumption 393 

IV.  Of  the  effect  of  unproductive  consumption  in  general 396 

V.  Of  individual  consumption,  its  motives  and  its  effects 401 

VI.  On  public  consumption  : 

Sect  1.  Of  the  nature  and  general  effect  of  public  consumption 412 

Of  the  principal  objects  of  national  expenditure 421 

Of  the  charge  of  civil  and  judicious  administration 425 

Of  charges,  military  and  naval 429 

Of  the  charges  of  public  instruction 432 

Of  the  charges  of  public  benevolent  institutions 438 

Of  the  charges  of  public  edifices  and  works 441 

VII.  Of  the  actual  contributors  to  public  consumption 444 

VIII.  Of  taxation: 

Sect  1.  Of  the  effect  of  all  kinds  of  taxation  in  general 446 

2.  Of  the  different  modes  of  assessment,  and  the  classes  they  press  upon 

respectively 468 

3.  Of  taxation  in  kind 473 

4.  Of  the  territorial  or  land-tax  of  England 476 

IX  Of  national  debt: 

Sect.  1.  Of  the  contracting  debt  by  national  authority,  and  of  its  general  effect.  477 
2.  Of  public  credit,  its  basis,  and  the  circumstances  that  endanger  its 

solidity 482 

Appendix '. 488 


INTRODUCTION. 


A  SCIENCE  only  advances  with  certainty,  when  the  plan 
of  inquiry  and  the  object  of  our  researches  have  been 
clearly  defined;  otherwise  a  small  number  of  truths  are 
loosely  laid  hold  of,  without  their  connexion  being  per- 
ceived, and  numerous  errors,  without  being  enabled  to  de- 
tect their  fallacy. 

For  a  long  time  the  science  of  politics,  in  strictness  lim- 
ited to  the  investigation  of  the  principles  which  lay  the 
foundation  of  the  social  order,  was  confounded  v/ith  political 
economy,  which  unfolds  the  manner  in  which  wealth  is  pro- 
duced, distributed,  and  consumed.  Wealth,  nevertheless, 
is  essentially  independent  of  political  organization.  Under 
every  form  of  government,  a  state,  whose  affairs  are  well 
administered,  may  prosper.  Nations  have  risen  to  opu- 
lence under  absolute  monarchs,  and  have  been  ruined  by 
popular  councils.  If  political  liberty  is  more  favourable  to 
he  development  of  wealth,  it  is  indirectly,  in  the  same 
manner  that  it  is  more  favourable  to  general  education. 

In  confounding  in  the  same  researches  the  essential  ele- 
ments of  good  government  with  the  principles  on  which  the 
growth  of  wealth,  either  public  or  private,  depends,  it  is  by 
no  means  surprising  that  authors  should  have  involved 
these  subjects  in  obscurity,  instead  of  elucidating  them. 
Stewart,  who  has  entitled  his  first  chapter  "Of  the  Govern- 
ment of  Mankind,"  is  liable  to  this  reproach  :  the  sect  of 
"Economists"  of  the  last  century,  throughout  all  their 
writings,  and  J.  J.  Rousseau,  in  the  article  "  Political  Eco 
nomy"  in  the  Encyclopedic,  lie  under  the  same  imputation, 

Since  the  time  of  Adam  Smith,  it  appears  to  me,  these 
two  very  distinct  inquiries  have  been  uniformly  separated  , 
the  term  political  economy*  being  now  confined  to  the  sci- 
ence which  treats  of  wealth,  and  that  of  politics,  to  desig 

*  From  OIKOS  a  house,  and  vofw  j  a  law  ;  economy,  the  law  which  regulates  the  household. 
Household,  according  to  the  Greeks,  comprehending  all  the  goods  in  possession  of  the 
family  ;  and  political,  from  inSAif,  cirntas,  extending  its  application  to  society  or  the  na 
tion  at  large. 

Political  economy  is  the  best  expression  that  can  be  used  to  designate  the  science  dis- 
cussed in  the  following  treatise,  which  is  not  the  investigation  of  natural  wealth,  or  that 
which  nature  supplies  us  with  gratuitously  and  without  limitation,  but  of  social  weilih 
exclusively,  which  is  founded  on  exchange  and  the  recognition  of  the  right  of  property 
both  social  regulations. 


Xvi  INTRODUCTION. 

nate  the  relations  existing  between  a  government  and  its 
people,  and  the  relations  of  different  states  to  each  other. 

The  wide  range  taken  into  the  field  of  pure  politics, 
whilst  investigating  the  subject  of  political  economy,  seem- 
ed to  furnish  a  much  stronger  reason  for  including  in  the 
same  inquiry  agriculture,  commerce  and  the  arts,  the  true 
sources  of  wealth,  and  upon  which  laws  have  but  an  acci- 
dental and  indirect  influence.  Thence  what  interminable 
digressions !  If,  for  example,  commerce  constitutes  a 
branch  of  political  economy,  all  the  various  kinds  of  com- 
merce form  a  part ;  and  as  a  consequence,  maritime  com- 
merce, navigation,  geography — where  shall  we  stop  ?  All 
human  knowledge  is  connected.  Accordingly,  it  is  neces- 
sary to  ascertain  the  points  of  contact,  or  the  articulations 
by  which  the  different  branches  are  united  ;  by  this  means, 
a  more  exact  knowledge  will  be  obtained  of  whatever  is 
peculiar  to  each,  and  where  they  run  into  one  another. 

In  the  science  of  political  economy,  agriculture,  com- 
merce and  manufactures  are  considered  only  in  relation  to 
the  increase  or  diminution  of  wealth,  and  not  in  reference 
to  their  processes  of  execution.  This  science  indicates  the 
cases  in  which  commerce  is  truly  productive,  where  what- 
ever is  gained  by  one  is  lost  by  another,  and  where  it  "is 
profitable  to  all ;  it  also  teaches  us  to  appreciate  its  several 
processes,  but  simply  in  their  results,  at  which  it  stops. 
Besides  this  knowledge,  the  merchant  must  also  understand 
the  processes  of  his  art.  He  must  be  acquainted  with  the 
commodities  in  which  he  deals,  their  qualities  and  defects, 
the  countries  from  which  they  are  derived,  their  markets, 
the  means  of  their  transportation,  the  values  to  be  given  for 
them  in  exchange,  and  the  method  of  keeping  accounts. 

The  same  remark  is  applicable  to  the  agriculturist,  to 
the  manufacturer,  and  to  the  practical  man  of  business ; 
to  acquire  a  thorough  knowledge  of  the  causes  and  conse- 
quences of  each  phenomenon,  the  study  of  political  econo- 
my is  essentially  necessary  to  them  all ;  and  to  become  ex- 
pert in  his  particular  pursuit,  each  one  must  add  thereto  a 
knowledge  of  its  processes.  These  different  subjects  of  in- 
vestigation were  not,  however,  confounded  by  Dr.  Smith  ; 
but  neither  he,  nor  the  writeis  who  succeeded  him,  have 
guarded  themselves  against  another  source  of  confusion, 
here  important  to  be  noticed,  inasmuch  as  the  develop- 


INTRODUCTION.  Xvu 

mcnts  resulting  from  it,  may  not  be  altogether  unuseful  in 
the  progress  of  knowledge  in  general,  as  well  as  in  the 
prosecution  of  our  own  particular  inquiry. 

In  political  economy,  as  in  natural  philosophy,  and  in 
every  other  study,  systems  have  been  formed  before  facts 
have  been  established ;  the  place  of  the  latter  being  sup- 
plied by  purely  gratuitous  assertions.  More  recently,  the 
inductive  method  of  philosophizing,  which,  since  the  time 
of  Bacon,  has  so  much  contributed  to  the  advancement  of 
every  other  science,  has  been  applied  to  the  conduct  of 
our  researches  in  this.  The  excellence  of  this  method 
consists  in  only  admitting  facts  carefully  observed,  and  the 
consequences  rigorously  deduced  from  them ;  thereby  effec- 
tually excluding  those  prejudices  and  authorities  which,  in 
every  department  of  literature  and  science,  have  so  often 
been  interposed  between  man  and  truth.  But,  is  the  whole 
extent  of  the  meaning  of  the  term,  facts,  so  often  made 
use  of,  perfectly  understood  ? 

It  appears  to  me,  that  this  word  at  once  designates  o5- 
jects  that  exist,  and  events  that  take  place  ;  thus  presenting 
two  classes  of  facts:  it  is,  for  example,  one  fact,  that  such 
an  object  exists ;  another  fact,  that  such  an  event  takes 
place  in  such  a  manner.  Objects  that  exist,  in  order  to 
serve  as  the  basis  of  certain  reasoning,  must  be  seen  ex- 
actly as  they  are,  under  every  point  of  view,  with  all  their 
qualities.  Otherwise,  whilst  supposing  ourselves  to  be 
reasoning  respecting  the  same  thing,  we  may,  under  the 
same  name,  be  treating  of  two  different  things. 

The  second  class  of  facts,  namely,  events  that  take  place, 
consists  of  the  phenomena  exhibited,  when  we  observe 
the  manner  in  which  things  take  place.  It  is,  for  instance, 
a  fact,  that  metals,  when  exposed  to  a  certain  degree  of 
heat,  become  fluid. 

The  manner  in  wh  .  h  things  exist  and  take  place,  con- 
stitutes what  is  calletl  the  nature  of  things  ;  and  a  careful 
observation  of  the  nature  of  things  is  the  sole  foundation 
of  all  truth. 

Hence,  a  twofold  classification  of  sciences ;  namely, 
those  which  may  be  styled  descriptive,  which  arrange  and 
accurately  designate  the  properties  of  certain  objects,  as 
botany  and  natural  history  ;  and  those  which  may  be  styled 
experimental,  which  unfold  the  reciprocal  action  of  sub- 
2*  O 


XVili  INTRODUCTION. 

stances  on  each  other,  or  in  other  words,  the  connexion 
between  cause  and  effect,  as  chemistry  and  natural  philo- 
sophy. Both  departments  are  founded  on  facts,  and  con- 
stitute an  equally  solid  and  useful  portion  of  knowledge. 
Political  economy  belongs  to  the  latter ;  in  showing  the 
manner  in  which  events  take  place  in  relation  to  wealth, 
it  forms  a  part  of  experimental  science.* 

But  facts  that  take  place  may  be  considered  in  two  points 
of  view;  either  as  general  or  constant,  or  as  particular  or 
variable.  General  facts  are  the  results  of  the  nature  of 
things  in  all  analogous  cases ;  particular  facts  as  truly  re- 
sult from  the  nature  of  things,  but  they  are  the  result  of 
several  operations  modified  by  each  other  in  a  particular 
case.  The  former  are  not  less  incontrovertible  than  the 
latter,  even  when  apparently  they  contradict  each  other. 
In  natural  philosophy,  it  is  a  general  fact,  that  heavy  bo- 
dies fall  to  the  earth  ;  the  water  in  a  fountain,  neverthe- 
less, rises  above  it.  The  particular  fact  of  the  fountain  is 
a  result  wherein  the  laws  of  equilibrium  are  combined  with 
those  of  gravity,  but  without  destroying  them. 

In  our  present  inquiry,  the  knowledge  of  these  two 
classes  of  facts,  namely,  of  objects  that  exist  and  of  events 
that  take  place,  embraces  two  distinct  sciences,  political 
economy  and  statistics. 

Political  economy,  from  facts  always  carefully  observed, 
makes  known  to  us  the  nature  of  wealth  ;  from  the  know- 
ledge of  its  nature  deduces  the  means  of  its  creation,  un- 
folds the  order  of  its  distribution,  and  the  phenomena  at 
tending  its  destruction.  It  is,  in  other  words,  an  exposi- 
tion of  the  general  facts  observed  in  relation  to  this  sub- 
ject. With  respect  to  wealth,  it  is  a  knowledge  of  effects 
and  of  their  causes.  It  shows  what  facts  are  constantly 
conjoined  with  ;  so  that  one  is  always  the  sequence  of  the 
other.  But  it  does  not  resort  for  any  further  explanations 
to  hypothesis :  from  the  nature  of  particular  events  their 
concatenations  must  be  perceived ;  the  science  must  con- 
duct us  from  one  link  to  another,  so  that  every  intelligent 

*  Experimental  science,  in.  order  to  establish  why  events  take  place  in  a  certain  man- 
ner, or  to  be  able  to  assign  a  particular  cause  for  a  particular  effect,  to  a  certain  extent 
must  be  descriptive.  Astronomy,  in  order  to  explain  the  eclipses  of  the  sun,  must  del 
monstrate  the  opacity  of  the  moon.  Political  economy,  in  like  manner,  in  order  to 
ehow  that  money  is  a  means  of  the  production  of  wealth,  but  not  the  end,  must  exhibit 
Hi  true  nature, 


INTRODUCTION.  xjx 

understanding  may  clearly  comprehend  in  what  manner 
the  chain  is  united.  It  is  this  which  constitutes  the  excel- 
lence of  the  modern  method  of  philosophizing. 

Statistics  exhibit  the  amount  of  production  and  of  con- 
sumption of  a  particular  country,  at  a  designated  period ; 
its  population,  military  force,  wealth,  and  whatever  else  is 
susceptible  of  valuation.  It  is  a  description  in  detail. 

Between  political  economy  and  statistics  there  is  the 
same  difference  as  between  the  science  of  politics  and 
history. 

The  study  of  statistics  may  gratify  curiosity,  but  it  can 
never  be  productive  of  advantage  when  it  does  not  indi- 
cate the  origin  and  consequences  of  the  facts  it  has  collect- 
ed ;  and  by  indicating  their  origin  and  consequences,  it  at 
once  becomes  the  science  of  political  economy  This 
doubtless  is  the  reason  why  these  two  distinct  sciences 
have  hitherto  been  confounded.  The  celebrated  work  of 
Dr.  Adam  Smith  can  only  be  considered  as  an  immethodical 
assemblage  of  the  soundest  principles  of  political  econo- 
my, supported  by  luminous  illustrations ;  of  highly  inge- 
nious researches  in  statistics,  blended  with  instructive  re- 
flections ;  it  is  not,  however,  a  complete  treatise  of  either 
science,  but  an  irregular  mass  of  curious  and  original 
speculations,  and  of  known  demonstrated  truths. 

A  perfect  knowledge  of  the  principles  of  political  econo- 
my may  be  obtained,  inasmuch  as  all  the  general  facts 
which  compose  this  science  may  be  discovered.  In  statis- 
tics this  never  can  be  the  case ;  this  latter  science,  like 
history,  being  a  recital  of  facts,  more  or  less  uncertain, 
and  necessarily  incomplete.  Of  the  statistics  of  former 
periods  and  distant  countries,  only  detached  and  very  im- 
perfect accounts  can  be  furnished.  With  respect  to  the 
present  time,  there  are  few  persons  who  unite  the  qualifi- 
cations of  good  observers  with  a  situation  favourable  for 
accurate  observation.  The  inaccuracy  of  the  statements 
we  are  compelled  to  have  recourse  to,  the  restless  suspi- 
cions of  particular  governments,  and  even  of  individuals, 
their  ill-will  and  indifference,  present  obstacles  often  in 
surmountable,  notwithstanding  the  toil  and  care  of  in- 
quirers to  collect  minute  details  with  exactness;  and  which, 
after  all,  when  in  their  possession,  are  only  true  for  an  in- 
stant. Dr.  Smith  accordingly  avows,  that  he  puts  no 


XX  INTRODUCTION 

great  faith  in  political  arithmetic ;  which  is  nothing  more 
than  the  arrangement  of  numerous  statistical  data. 

Political  economy,  on  the  other  hand,  whenever  the 
principles  which  constitute  its  basis  are  the  rigorous  de- 
ductions of  undeniable  general  facts,  rests  upon  an  im- 
moveable  foundation.  General  facts  undoubtedly  are  found- 
ed upon  the  observation  of  particular  facts ;  but  upon 
such  particular  facts  as  have  been  selected  from  those 
most  carefully  observed,  best  established,  and  witnessed 
by  ourselves.  When  the  results  of  these  facts  have  uni- 
formly been  the  same,  the  cause  of  their  having  been  so 
satisfactorily  demonstrated,  and  the  exceptions  to  them 
even  confirming  other  principles  equally  well  established, 
we  are  authorised  to  give  them  as  ultimate  general  facts, 
and  to  submit  them  with  confidence  to  the  examination 
of  all  competent  inquirers,  who  may  be  again  desirous  of 
subjecting  them  to  experiment.  A  new  particular  fact, 
when  insulated,  and  the  connexion  between  its  antecedents 
and  consequents  not  established  by  reasoning,  is  not  suffi- 
cient to  shake  our  confidence  in  a  general  fact ;  for  who 
can  say  that  some  unknown  circumstance  has  not  produced 
the  difference  noticed  in  their  several  results?  Alight 
feather  is  seen  to  mount  in  the  air,  and  sometimes  remain 
there  for  a  long  time  before  it  falls  back  to  the  ground. 
Would  it  not,  nevertheless,  be  erroneous  to  conclude  that 
this  feather  is  not  affected  by  the  universal  law  of  gravi- 
tation ?  In  political  economy  it  is  a  general  fact,  that  the 
interest  of  money  rises  in  proportion  to  the  risk  run  by 
the  lender  of  not  being  repaid.  Shall  it  be  inferred  that 
this  principle  is  false,  from  having  seen  money  lent  at  a 
low  rate  of  interest  upon  hazardous  occasions  ?  The  lend- 
er may  have  been  ignorant  of  the  risk,  gratitude  or  fear 
may  have  induced  sacrifices,  and  the  general  law,  disturbed 
in  this  particular  case,  will  resume  its  entire  force  the  mo- 
ment the  causes  of  its  interruption  have  ceased  to  operate. 
Finally,  how  small  a  number  of  particular  facts  are  com- 
pletely examined,  and  how  few  among  them  are  observed 
under  all  their  aspects?  And  in  supposing  them  well  ex- 
amined, well  observed,  and  well  described,  how  many  of 
them  eithei  prove  nothing,  or  directly  the  reverse  of  what 
s  intended  to  be  established  by  them. 

Hence,  there  is  not  an  absurd  theory,  or  an  extravagant 


INTRODUCTION.  Mj 

opinion  that  has  not  been  supported  by  an  appeal  to  facts;* 
and  it  is  by  facts  also  that  public  authorities  have  been  so 
often  misled.  But  a  knowledge  of  facts,  without  a  know- 
ledge of  their  mutual  relations,  without  being  able  to  show 
why  the  one  is  a  cause,  and  the  other  a  consequence,  is 
really  no  better  than  the  crude  information  of  an  office- 
clerk,  of  whom  the  most  intelligent  seldom  becomes  ac- 
quainted with  more  than  one  particular  series,  which  only 
enables  him  to  examine  a  question  in  a  single  point  of  view. 

Nothing  can  be  more  idle  than  the  opposition  of  theory 
to  practice!  What  is  theory,  if  it  be  not  a  knowledge  of 
the  laws  which  connect  effects  with  their  causes,  or  facts 
with  facts  ?  And  who  can  be  better  acquainted  with  facts 
than  the  theorist  who  surveys  them  under  all  their  aspects, 
and  comprehends  their  relation  to  each  other?  And  what 
is  practice!  without  theory,  but  the  employment  of  means 
without  knowing  how  or  why  they  act  ?  In  any  investi- 
gation, to  treat  dissimilar  cases  as  if  they  were  analogous, 
is  but  a  dangerous  kind  of  empiricism,  leading  to  conclu- 
sions never  foreseen. 

Hence  it  is,  that  after  having  seen  the  exclusive  or  re- 
strictive system  of  commerce,  a  system  founded  on  the 
opinion  that  one  nation  can  only  gain  what  another  loses, 
almost  universally  adopted  throughout  Europe  after  the 
revival  of  arts  and  letters ;  after  having  seen  taxation 
without  intermission  perpetually  increasing,  and  in  some 
countries  extending  itself  to  a  most  enormous  amount ; 
and  after  having  seen  these  same  countries  become  more 
opulent,  more  populous,  and  more  powerful,  than  at  the 
time  they  carried  on  an  unrestricted  trade,  and  were  almost 
entirely  exempt  from  public  burdens,  the  generality  of  man- 
kind have  concluded  that  national  wealth  and  power  were 
attributable  to  the  restraints  imposed  on  the  application 
of  industry,  and  to  .the  taxes  levied  from  the  incomes  of 
individuals.  •  Shallow  thinkers  have  even  pretended  that 
this  opinion  was  founded  on  facts,  and  that  every  different 
one  was  the  offspring  of  a  wild  and  disordered  imagination. 

*  In  France,  the  minister  of  the  interior,  in  his  expose  of  1813,  a  most  disastrous  pe- 
riod, when  foreign  commerce  was  destroyed,  and  the  national  resources  of  every  descrip- 
tion rapidly  declining,  boasted  of  having  proved  by  indubitable  calculations,  that  the 
country  was  in  a  higher  state  of  prosperity  than  it  ever  before  had  been. 

t  By  the  term  practice,  is  not  here  meant  the  manual  skill  which  enables  the  artificer 
or  clerk  to  execute  with  greater  celerity  and  precision  whatever  he  performs  daily,  and 
which  constitutes  his  peculiar  talent ;  but  the  method  pursued  in  superintending  and 
administering  public  or  private  affairs. 


XXii  INTRODUCTION. 

It  is,  however,  on  the  contrary,  evident  that  the  support- 
ers of  the  opposite  opinion  embraced  a  wider  circle  of 
facts,  and  understood  them  much  better  than  their  oppo- 
nents. The  very  remarkable  impulse  given,  during  the 
middle  ages,  to  the  industry  of  the  free  states  of  Italy  and 
of  the  Hanse  towns  of  the  north  of  Europe,  the  spectacle 
of  riches  it  exhibited  in  both,  the  shock  of  opinions  occa- 
sioned by  the  crusades,  the  progress  of  the  arts  and 
sciences,  the  improvement  of  navigation  and  consequent 
discovery  of  the  route  to  India,  and  of  the  continent  of 
America,  as  well  as  a  succession  of  other  less  important 
events,  were  all  known  to  them  as  the  true  causes  of  the 
increased  opulence  of  the  most  ingenious  nations  on  the 
globe.  And  although  they  were  aware  that  this  activity 
had  received  successive  checks,  they  at  the  same  time  knew 
that  it  had  been  freed  from  more  oppressive  obstacles.  In 
consequence  of  the  authority  of  the  feudal  lords  and  barons 
declining,  the  intercourse  between  the  different  provinces 
and  states  could  no  longer  be  interrupted ;  roads  became 
improved,  travelling  more  secure,  and  laws  less  arbitrary ; 
the  enfranchised  towns,  becoming  immediately  dependent 
upon  the  crown,  found  the  sovereign  interested  in  their 
advancement;  and  this  enfranchisement,  which  the  natural 
course  of  things  and  the  progress  of  civilization  had  ex- 
tended to  the  country,  secured  to  every  class  of  producers 
the  fruits  of  their  industry.  In  every  part  of  Europe  per- 
sonal freedom  became  more  generally  respected ;  if  not 
from  a  more  improved  organization  of  political  society, 
at  least  from  the  influence  of  public  sentiment.  Certain 
prejudices,  such  as  branding  with  the  odious  name  of 
usury  all  loans  upon  interest,  and  attaching  the  importance 
of  nobility  to  idleness,  had  begun  to  decline.  Nor  is  this 
all.  Enlightened  individuals  have  not  only  remarked  the 
influence  of  these,  but  of  many  other  .analogous  facts;  it 
has  been  perceived  by  them,  that  the  decline  of  prejudices 
has  been  favourable  to  the  advancement  of  science,  or  to 
a  more  exact  knowledge  of  the  immutable  laws  of  nature  ; 
that  this  improvement  in  the  cultivation  of  science  has 
itself  been  favourable  to  the  progress  of  industry,  and  in- 
dustry to  national  opulence.  From  such  an  induction  of 
facts  they  have  been  enabled  to  conclude,  with  much 
greater  certainty  than  the  unthinking  multitude,  that 


INTRODUCTION.  xxjii 

although  many  modern  states  in  the  midst  of  taxation  and 
restrictions  have  risen  to  opulence  and  power,  it  is  not 
owing  to  these  restraints  on  the  natural  course  of  human 
affairs,  but  in  spite  of  such  powerful  causes  of  discourage- 
ment. The  prosperity  of  the  same  countries  would  have 
been  much  greater,  had  they  been  governed  by  a  more 
liberal  and  enlightened  policy.* 

To  obtain  a  knowledge  of  the  truth,  it  is  not  then  so  ne- 
cessary to  be  acquainted  with  a  great  number  of  facts,  as 
with  such  as  are  essential,  and  have  a  direct  and  immediate 
influence ;  and,  above  all,  to  examine  them  under  all  their 
aspects,  to  be  enabled  to  deduce  from  them  just  conclu- 
sions, and  be  assured  that  the  consequences  ascribed  to 
them  do  not  in  reality  proceed  from  other  causes.  Every 
other  knowledge  of  facts,  like  the  erudition  of  an  almanac, 
is  a  mere  compilation  from  which  nothing  results.  And  it 
may  be  remarked,  that  this  sort  of  information  is  peculiar 
to  men  of  clear  memories  and  clouded  judgments;  men  who 
declaim  against  the  best  established  doctrines,  the  fruits 
of  the  most  enlarged  experience  and  profoundest  reason- 
ing ;  and  whilst  inveighing  against  system,  whenever  their 
own  routine  is  departed  from,  are  precisely  those  most 
under  its  influence,  and  who  defend  it  with  stubborn  folly, 
fearful  rather  of  being  convinced,  than  desirous  of  arriving 
at  certainty. 

Thus,  if  from  all  the  phenomena  of  production,  as  well 
as  from  the  experience  of  the  most  extensive  commerce, 
you  demonstrate  that  a  free  intercourse  between  nations 
is  reciprocally  advantageous,  and  that  the  mode  found  to 
be  most  beneficial  to  individuals  transacting  business  with 
foreigners,  must  be  equally  so  to  nations,  men  of  contracted 
views  and  high  presumption  will  accuse  you  of  system. 
Ask  them  for  their  reasons,  and  they  will  immediately  talk 
to  you  of  the  balance  of  trade ;  will  tell  you,  it  is  cleai 
that  a  nation  must  be  ruined  by  exchanging  its  money  for 

*  Hence  it  is  that  nations  seldom  derive  any  benefit  from  the  lessons  of  experience. 
To  profit  by  them,  the  community  at  large  must  be  enabled  to  seize  the  connexion  be- 
tween  causes  and  their  consequences ;  which  at  once  supposes  a  very  high  degree  of 
intelligence  and  a  rare  capacity  for  reflection.  Whenever  mankind  shall  be  in  a  situa- 
tion to  profit  by  experience,  they  will  no  longer  require  her  lessons ;  plain  sound  sense 
will  then  be  sufficient.  This  is  one  reason  of  our  being  subject  to  the  necessity  of  con- 
stant control.  All  that  a  people  can  desire  is  that  laws  conducive  to  the  general  interest 
of  society  should  be  enacted  and  carried  into  effect ;  a  problem  which  different  political 
constitutions  more  or  less  imperfectly  solve. 


INTRODUCTION. 

merchandise — in  itself  a  system.  Some  will  assert  that 
circulation  enriches  a  state,  and  that  a  sum  of  money,  by 
passing  through  twenty  different  hands,  is  equivalent  to 
twenty  times  its  own  value ;  others,  that  luxury  is  favour- 
able to  industry,  and  economy  ruinous  to  every  branch  of 
commerce — both  mere  systems ;  and  all  will  appeal  to 
facts  in  support  of  these  opinions,  like  the  shepherd,  who. 
upon  the  faith  of  his  eyes,  affirmed  that  the  sun,  which  he 
saw  rise  in  the  morning  and  set  in  the  evening,  during  the 
day  traversed  the  whole  extent  of  the  heavens,  treating  as 
an  idle  dream  the  laws  of  the  planetary  world. 

Persons,  moreover,  distinguished  by  their  attainments 
in  other  branches  of  knowledge,  but  ignorant  of  the  prin- 
ciples of  this,  are  too  apt  to  suppose  that  absolute  truth  is 
confined  to  the  mathematics  and  to  the  results  of  careful 
observation  and  experiment  in  the  physical  sciences ;  ima- 
gining that  the  moral  and  political  sciences  contain  no  in- 
variable facts  or  indisputable  truths,  and  therefore  cannot 
be  considered  as  genuine  sciences,  but  merely  hypothetical 
systems,  more  or  less  ingenious,  but  purely  arbitrary.  The 
opinion  of  this  class  of  philosophers  is  founded  upon  the 
want  of  agreement  among  the  writers  who  have  investi- 
gated these  subjects,  and  from  the  wild  absurdities  taught 
by  some  of  them.  But  what  science  has  been  free  from 
extravagant  hypotheses  ?  How  many  years  have  elapsed 
since  those  most  advanced  have  been  altogether  disen- 
gaged from  system  ?  On  the  contrary,  do  we  not  still  see 
men  of  perverted  understandings  attacking  the  best  estab- 
lished positions  ?  Forty  years  have  not  elapsed  since 
water,  so  essential  to  our  very  existence,  and  the  atmo- 
sphere in  which  we  perpetually  breathe,  have  been  accu- 
rately analyzed.  The  experiments  and  demonstrations, 
nevertheless,  upon  which  this  doctrine  is  founded,  are  con- 
tinually assailed ;  although  repeated  a  thousand  times  in 
different  countries  by  the  most  acute  and  cautious  experi- 
menters. A  want  of  agreement  exists  in  relation  to  a  de- 
scription of  facts  much  more  simple  and  obvious  than  the 
most  part  of  those  in  moral  and  political  science.  Are 
not  natural  philosophy,  chemistry,  botany,  mineralogy,  and 
physiology,  still  fields  of  controversy,  in  which  opinions 
are  combated  with  as  much  violence  and  asperity  as  in 
political  economy  ?  The  same  facts  are,  indeed,  observed 


INTRODUCTION. 

by  both  parties,  but  are  classed  and  explained  differently 
by  each  ;  and  it  is  worthy  of  remark,  that  in  these  contests 
genuine  philosophers  are  not  arrayed  against  pretenders. 
Leibnitz  and  Newton,  Linnaeus  and  Jussieu,  Priestley  and 
LaVoisier,  Desaussure  and  Dolomieu,  were  all  men  of  un- 
common genius,  who,  however,  did  not  agree  in  their  phi- 
losophical systems.  But  have  not  the  sciences  they  taught 
an  existence,  notwithstanding  these  disagreements  ?* 

In  like  manner,  the  general  facts  constituting  the 
sciences  of  politics  and  morals,  exist  independently  of  all 
controversy.  Hence  the  advantage  enjoyed  by  every  one 
who,  from  distinct  and  accurate  observation,  can  establish 
the  existence  of  these  general  facts,  demonstrate  their  con- 
nexion, and  deduce  their  consequences.  They  as  certainly 
proceed  from  the  nature  of  things  as  the  laws  of  the  ma- 
terial world.  We  do  not  imagine  them ;  they  are  results 
disclosed  to  us  by  judicious  observation  and  analysis. 
Sovereigns,  as  well  as  their  subjects,  must  bow  to  their 
authority,  and  never  can  violate  them  with  impunity. 

General  facts,  or,  if  you  please,  the  general  laws  which 
facts  follow,  are  styled  principles,  whenever  it  relates  to 
their  application ;  that  is  to  say,  the  moment  we  avail  our- 
selves of  them  in  order  to  ascertain  the  rule  of  action  of 

*  "  The  controversies,"  says  Col.  Torrens,  in  his  '  Essay  on  the  Production  of  Wealth,* 
published  in  1821,  "which  at  present  exist  amongst  the  most  celebrated  masters  of  po 
litical  economy,  have  been  brought  forward  by  a  lively  and  ingenious  author  as  an  ob 
jection  against  the  study  of  the  science.  A  similar  objection  might  hav«  been  urged, 
in  a  certain  stage  of  its  progress,  against  every  branch  of  human  knowledge.  A  few 
years  ago,  when  the  brilliant  discoveries  in  chemistry  began  to  supersede  the  ancient 
doctrine  of  phlogiston,  controversies,  analogous  to  those  which  now  exist  amongst  polit- 
ical economists,  divided  the  professors  of  natural  knowledge;  and  Dr.  Priestley,  like  Mr. 
Malthus,  appeared  as  the  pertinacious  champion  of  the  theories  which  the  facts  estab- 
lished by  himself  had  so  largely  contributed  to  overthrow.  In  the  progress  of  the  human 
mind,  a  period  of  controversy  amongst  the  cultivators  of  any  branch  of  science  must 
necessarily  precede  the  period  of  their  unanimity.  But  this,  instead  of  furnishing  a 
reason  for  abandoning  the  pursuits  of  scienpe,  while  its  first  principles  remain  in  uncer- 
tainty, should  stimulate  us  to  prosecute  our  studies  with  more  ardour  and  perseverance 
until  upon  every  question  within  the  compass  of  the  human  faculties,  doubt  is  removed 
and  certainty  attained.  With  respect  to  political  economy,  the  period  of  controversy  is 
passing  away,  and  that  of  unanimity  rapidly  approaching.  Twenty  years  hence  there 
will  scarcely  exist  a  doubt  respecting  any  of  its  fundamental  principles  " 

And  in  the  preface  of  the  third  edition  of  his  '  Essay  on  the  External  Corn  Trade,' 
published  in  1826,  Col.  Torrens  makes  these  further  remarks  :  "On  a  former  occasion, 
the  author  ventured  to  predict,  that  at  no  distant  period,  controversy  amongst  the  pro- 
fessors of  political  economy  would  cease,  and  unanimity  prevail,  respecting  the  funda- 
mental principles  of  the  science.  Rethinks  he  can  already  perceive  the  unequivocal 
signs  of  the  approaching  fulfilment  of  this  prediction.  Since  it  was  hazarded,  two 
works  have  appeared,  each  of  which,  in  its  own  peculiar  line,  is  eminently  calculated  to 
correct  the  errors  which  previously  prevailed.  These  publications  are, '  A  Critical  Dis- 
sertation on  the  Nature,  Causes,  and  Measures  of  Value,  by  an  anonymous  author ;'  au<? 
*  Thoughts  and  Details  on  High  and  Low  Prices,  by  Mr.  Tooke.' " — AMERICAN  EDITOR 
3  I) 


XXVI  INTRODUCTION. 

any  combination  of  circumstances  presented  to  us.  A 
knowledge  of  principles  furnishes  the  only  certain  means 
of  uniformly  conducting  any  inquiry  with  success. 

Political  economy,  in  the  same  manner  as  the  exact 
sciences,  is  composed  of  a  few  fundamental  principles,  and 
of  a  great  number  of  corollaries  or  conclusions,  drawn 
from  these  principles.  It  is  essential,  therefore,  for  the 
advancement  of  this  science  that  these  principles  should 
be  strictly  deduced  from  observation ;  the  number  of  con- 
clusions to  be  drawn  from  them  may  afterwards  be  either 
multiplied  or  diminished  at  the  discretion  of  the  inquirer, 
according  to  the  object  he  proposes.  To  enumerate  all 
their  consequences,  and  give  their  proper  explanations, 
would  be  a  work  of  stupendous  magnitude,  and  necessarily 
incomplete.  Besides,  the  more  this  science  shall  become 
improved,  and  its  influence  extended,  the  less  occasion  will 
there  be  to  deduce  consequences  from  its  principles,  as 
these  will  spontaneously  present  themselves  to  every  eye  ; 
and  being  within  the  reach  of  all,  their  application  will  be 
readily  made.  A  treatise  on  political  economy  will  then 
be  confined  to  the  enunciation  of  a  few  general  principles, 
not  requiring  even  the  support  of  proofs  or  illustrations ; 
because  these  will  be  but  the  expression  of  what  every  one 
will  know,  arranged  in  a  form  convenient  for  comprehend- 
ing them,  as  well  in  their  whole  scope  as  in  their  relation 
to  each  Qther. 

It  would,  however,  be  idle  to  imagine  that  greater  pre- 
cision, or  a  more  steady  direction  could  be  given  to  this 
study,  by  the  application  of  mathematics  to  the  solution 
of  its  problems.  The  values  with  which  political  economy 
is  concerned,  admitting  of  the  application  to  them  of  the 
terms  plus  and  minus,  are  indeed  within  the  range  of  ma- 
thematical inquiry ;  but  being  at  the  same  time  subject  to 
the  influence  of  the  faculties,  the  wants  and  the  desires  of 
mankind,  they  are  not  susceptible  of  any  rigorous  ap- 
preciation, and  cannot,  therefore,  furnish  any  data  for  ab- 
solute calculations.  In  political  as  well  as  in  physical 
science,  all  that  is  essential  is  a  knowledge  of  the  corinex 
ion  between  causes  and  their  consequences.  Neither  the 
phenomena  of  the  moral  or  material  world  are  subject  to 
strict  arithmetical  computation.* 

*  We  may,  for  example,  know  that  for  any  given  year  the  price  of vnne  will  infallibly 


INTRODUCTION. 

These  considerations  respecting  the  nature  and  object 
of  political  economy,  and  the  best  method  of  obtaining  a 

depend  upon  the  quantity  to  be  sold,  compared  with  the  extent  of  the  demand.  But  if 
we  are  desirous  of  submitting  these  two  data  to  mathematical  calculation,  their  ultimate 
elements  must  be  decomposed  before  we  can  become  thoroughly  acquainted  with  them, 
or  can,  with  any  degree  of  precision,  distinguish  the  separate  influence  of  each.  Hence, 
it  is  not  only  necessary  to  determine  what  will  be  the  product  of  the  succeeding  vintage, 
while  yet  exposed  to  the  vicissitudes  of  the  weather,  but  the  quality  it  will  possess,  the 
quantity  remaining  on  hand  of  the  preceding  vintage,  the  amount  of  capital  that  will 
oe  at  the  disposal  of  the  dealers,  and  require  them,  more  or  less  expeditiously,  to  get 
oack  their  advances.  We  must  also  ascertain  the  opinion  that  may  be  entertained  as  to 
the  possibility  of  exporting  the  article,  which  will  altogether  depend  upon  our  impressions 
a»  to  the  stability  of  the  laws  and  government,  that  vary  from  day  to  day,  and  respect- 
ing  .which  no  two  individuals  exactly  agree.  All  these  data,  and  probably  many  others 
besides,  must  be  accurately  appreciated,  solely  to  determine  the  quantity  to  be  put  in 
circulation;  itself  but  one  of  the  elements  of  price.  To  determine  the  quantity  to  be 
demanded,  the  price  at  which  the  commodity  can  be  sold  must  already  be  known,  as 
the  demand  for  it  will  increase  in  proportion  to  its  cheapness ;  we  must  also  know  the 
former  stock  on  hand,  and  the  tastes  and  means  of  the  consumers,  as  various  as  their 
persons.  Their  ability  to  purchase  will  vary  according  to  the  more  or  less  prosperous 
condition  of  industry  in  general,  and  of  their  own  in  particular ;  their  wants  will  vary 
also  in  the  ratio  of  the  additional  means  at  their  command  of  substituting  one  liquor 
for  another,  such  as  beer,  cider,  &c.  I  suppress  an  infinite  number  of  less  important 
considerations,  more  or  less  affecting  the  solution  of  the  problem  ;  for  I  question 
whether  any  individual,  really  accustomed  to  the  application  of  mathematical  analysis, 
would  even  venture  to  attempt  this,  not  only  on  account  of  the  numerous  data,  but  in 
consequence  of  the  difficulty  of  characterizing  them  with  any  thing  like  precision,  and 
of  combining  their  separate  influences.  Such  persons  as  have  pretended  to  do  it,  have 
not  been  able  to  enunciate  these  questions  into  analytical  language,  without  divesting 
them  of  their  natural  complication,  by  means  of  simplifications,  and  arbitrary  suppres- 
sions, of  which  the  consequences,  not  properly  estimated,  always  essentially  change  the 
condition  of  the  problem,  and  pervert  all  its  results  ;  so  that  no  other  inference  can  be 
d*educed  from  such  calculations  than  from  formula  arbitrarily  assumed.  Thus,  instead 
of  recognizing  in  their  conclusions  that  harmonious  agreement  which  constitutes  the 
peculiar  character  of  rigorous  geometrical  investigation,  by  whatever  method  they  may 
have  been  obtained,  we  only  perceive  vague  and  uncertain  inferences,  whose  differences 
are  often  equal  to  the  quantities  sought  to  be  determined.  What  course  is  then  to  be 
pursued  by  a  judicious  inquirer  in  the  elucidation  of  a  subject  so  much  involved  ?  The 
same  which  would  be  pursued  by  him,  under  circumstances  equally  difficult,  which  de- 
cide the  greater  part  of  the  actions  of  his  life.  He  will  examine  the  immediate  elements 
of  the  proposed  problem,  and  after  having  ascertained  them  with  certainty,  (which  in 
political  economy  can  be  effected,)  will  approximately  value  their  mutual  influences  with 
the  intuitive  quickness  of  an  enlightened  understanding,  itself  only  an  instrument  by 
means  of  which  the  mean  result  of  a  crowd  of  probabilities  can  be  estimated,  but  never 
calculated  with  exactness. 

Cabanis,  in  describing  the  revolutions  in  the  science  of  medicine,  makes  a  remark 
perfectly  analogous  to  this.  'The  vital  phenomena,'  says  he,  'depend  upon  so  many 
unknown  springs,  held  together  under  such  various  circumstances,  which  observation 
vainly  attempts  to  appreciate,  that  these  problems,  from  not  being  stated  with  all  their 
conditions,  absolutely  defy  calculation.  Hence  whenever  writers  on  mechanics  have 
endeavoured  to  subject  the  laws  of  life  to  their  method,  they  have  furnished  the  scientific 
world  with  a  remarkable  spectacle,  well  entitled  to  our  most  serious  consideration.  The 
terms  they  employed  were  correct,  the  process  of  reasoning  strictly  logical,  and,  never- 
theless, all  the  results  were  erroneous.  Further,  although  the  language  and  the  method 
of  employing  it  were  the  same  among  all  the  calculators,  each  of  them  obtained  dis- 
tinct and  different  results ;  and  it  is  by  the  application  of  this  method  of  investigation 
to  subjects  to  which  it  is  altogether  inapplicable,  that  systems  the  most  whimsical,  fal- 
lacious, and  contradictory,  have  been  maintained.' 

D'Alembert,  in  his  treatise  on  Hydrodynamics,  acknowledges  that  the  velocity  of  tno 
blood  in  its  passage  through  the  vessels  entirely  resists  every  kind  of  calculation.  Sone- 
bier  made  a  similar  observation  in  his  Essai  sur  V Art  d'obserrer,  (vol.  1,  page  81.) 

Whatever  has  been  said  by  able  teachers  and  judicious  philosophers,  in  relation  to 
our  conclusions  in  natural  science,  is  much  more  applicable  to  moral ;  and  points  or.t 


INTRODUCTION. 

thorough  knowledge  of  its  principles,  will  supply  us  with 
the  means  of  appreciating  the  efforts  hitherto  made  to- 
wards the  advancement  of  this  science. 

The  literature  of  the  ancients,  their  legislation,  their 
public  treaties,  and  their  administration  of  the  conquered 
provinces,  all  proclaim  their  utter  ignorance  of  the  nature 
and  origin  of  wealth,  of  the  manner  in  which  it  is  distri- 
buted, and  of  the  effects  .of  its  consumption.  They  knew, 
what  has  always  been  known  wherever  the  right  of  pro- 
perty has  been  sanctioned  by  laws,  that  riches  are  in- 
creased by  economy,  and  diminished  by  extravagance. 
Xenophon  extols  order,  activity,  and  intelligence,  as  cer- 
tain means  of  obtaining  prosperity ;  but  without  deducing 
these  maxims  from  any  general  law,  or  without  being  able 
to  show  the  connexion  between  causes  and  their  conse- 
quences. He  advises  the  Athenians  to  protect  commerce, 
and  to  receive  strangers  with  kindness ;  yet  so  little  was 
he  aware  to  what  extent  this  advice  would  be  proper,  that, 
upon  another  occasion,  he  expresses  doubts  whether  com- 
merce be  really  profitable  to  the  republic. 

Plato  and  Aristotle,  it  is  true,  notice  some  invariable 
relations  between  the  different  modes  of  production,  and 
the  results  obtained  from  them.  Plato  sketches  with  tol- 
erable fidelity,*  the  effects  of  the  separation  of  social  em- 
ployments ;  but  it  is  simply  with  a  view  to  illustrate  man's 
social  character  and  the  necessity  he  is  in,  from  his  multi- 
farious wants,  of  uniting  in  extensive  societies  in  which 

'  O 

each  individual  may  be  exclusively  occupied  with  one  spe- 
cies of  production.  His  view  is  entirely  a  political  one ; 
and  he  has  deduced  from  it  no  other  conclusion. 

In  his  treatise  on  Politics,  Aristotle  goes  farther.  He 
distinguishes  natural  from  artificial  production.  He  styles 
natural,  whatever  creates  those  objects  of  consumption 
required  by  a  family,  or,  at  most,  whatever  is  obtained  by 
exchanges  in  kind.  No  other  advantage,  according  to 
him,  is  derived  from  real  production ;  artificial  gain  he 
condemns.  Besides,  he  does  not  support  these  opinions 
by  any  reasoning  founded  upon  accurate  observation. 

the  cause  of  our  always  being  misled  in  political  economy,  whenever  we  have  subjected 
its  phenomena  to  mathematical  calculation.  In  such  case  it  becomes  the  most  dangn* 
ous  of  all  abstractions. 

•  Republic,  Book  II. 


INTRODUCTION. 

From  the  manner  in  which  he  expresses  himself  in  relation 
to  the  effect  of  savings  and  loans  on  interest,  it  is  evident 
that  he  knew  nothing  of  the  nature  and  employment  of 
capital. 

What  can  we  expect  from  nations  still  less  advanced  in 
civilization  than  the  Greeks  ?  We  may  recollect  that  a 
law  of  Egypt  obliged  the  son  to  adopt  the  profession  of 
his  father.  This,  in  certain  cases,  was  to  require  the  crea- 
tion of  a  greater  quantity  of  products  than  the  particular 
state  of  society  called  for ;  to  oblige  an  individual,  in  or- 
der to  obey  the  law,  to  ruin  himself,  and  to  continue  the 
exercise  of  his  productive  functions,  whether  in  possession 
of  capital  or  not ;  which  is  altogether  absurd.*  The  Ro- 
mans, in  treating  every  branch  of  industry,  except  agri- 
culture (and  we  know  not  why,)  with  contempt,  betray 
the  same  ignorance.  Their  pecuniary  transactions  must 
be  numbered  amongst  their  most  unskilful  operations. 

The  moderns,  even  after  having  freed  themselves  from 
the  barbarism  of  the  middle  ages,  have  not  for  a  very  long 
time  been  more  advanced.  We  shall  have  occasion  to 
notice  the  stupidity  of  a  multitude  of  laws  relating  to  the 
Jews,  to  the  interest  of  money,  and  to  money  itself.  Henry 
IV.  granted  to  his  favourites  and  mistresses,  as  favours 
which  cost  him  nothing,  the  permission  to  practise  a  thou- 
sand petty  extortions,  and  to  collect  for  their  own  benefit, 
from  various  branches  of  commerce,  as  many  petty  taxes. 
He  authorized  the  count  of  Soissons  to  levy  a  duty  of  fif- 
teen sous  upon  every  bale  of  merchandise  which  should 
be  exported  from  the  kingdom.t 

In  every  branch  of  knowledge,  example  has  preceded 
precept.  The  fortunate  enterprises  of  the  Portuguese 
and  Spaniards  during  the  fifteenth  century,  the  active  in- 
dustry of  Venice,  Genoa,  Florence,  Pisa,  the  provinces 
of  Flanders,  and  the  free  cities  of  Germany  at  this  same 
epoch,  gradually  directed  the  attention  of  some  philoso- 
phers to  the  theory  of  wealth. 

These  inquiries,  like  almost  every  other  in  the  arts  and 
sciences,  after  the  revival  of  letters,  originated  in  Italy 

*  When  we  find  almost  every  historian,  from  Herodotus  to  Bossuet,  boasting  of  tin* 
and  other  similar  laws,  it  will  be  seen  how  important  it  is  that  all  who  undertake  In 
write  history  should  have  some  knowledge  of  the  science  of  political  economy. 

t  See  Sully's  Memoirs,  Book  XVI. 
3* 


XXX  INTRODUCTION. 

As  far  back  as  the  sixteenth  century,  Bolero  was  engaged 
in  investigating  the  real  sources  of  public  prosperity.  In 
the  year  1613,  Antonio  Serra  composed  a  treatise,  in  which 
he  particularly  noticed  the  productive  power  of  industry ; 
but  the  title  of  his  work  sufficiently  indicates  its  errors. 
Wealth,  according  to  his  hypothesis,  consisted  only  of 
gold  and  silver.*  Davanzati  wrote  upon  money  and  upon 
exchange;  and  at  the  beginning  of  the  eighteenth  century, 
fifty  years  before  the  time  of  Quesnay,  Bandini  of  Sienna 
had  shown,  both  from  reasoning  and  experience,  that  there 
never  had  been  a  scarcity  of  food,  except  in  those  coun- 
tries where  the  government  had  itself  interfered  to  supply 
the  people.  Belloni,  a  banker  at  Rome,  in  the  year  1750, 
published  a  dissertation  on  commerce,  evincing  his  inti- 
mate acquaintance  with  the  nature  of  money  and  ex- 
changes, although  at  the  same  time  infected  with  the  the- 

o        *  o 

ory  of  the  balance  of  trade.  His  labours  were  rewarded 
by  the  Pope  with  the  title  of  marquess.  Carli,  before  Dr. 
Smith,  demonstrated  that  the  balance  of  trade  neither 
taught  nor  proved  any  thing.  Algarotti,  whose  writings 
on  other  subjects  Voltaire  has  made  known,  wrote  also 
upon  the  science  of  political  economy ;  and  the  little  he 
has  left  exhibits  the  accuracy  and  extent  of  his  knowledge, 
as  well  as  his  acuteness.  He  confines  himself  so  strictly 
to  facts,  and  so  uniformly  founds  his  speculations  on  the 
nature  of  things,  that  although  he  did  not  get  possession 
of  the  proof  of  his  principles,  and  of  their  relation  to  each 
other,  he  has,  nevertheless,  guarded  himself  against  every 
thing  like  hypothesis  and  system.  In  1764,  Genovesi  com- 
menced a  course  of  public  lectures  on  political  economy, 
in  the  chair  founded  at  Naples  by  the  care  of  the  highly 
esteemed  and  learned  Intieri.  In  consequence  of  this  ex- 
ampie,  other  professorships  of  political  economy  were 
afterwards  established  at  Milan,  and  more  recently  in 
most  of  the  universities  in  Germany  and  Russia. 

In  1750,  the  abbe  Galiani,  so  well  known  since  from  his 
connexion  with  many  of  the  French  philosophers,  and  by 
his  Dialogues  on  the  Corn  Trade,  although  at  that  time 
a  very  young  man,  published  a  Treatise  on  Money,  which 
discovered  such  uncommon  talents  and  information,  as  to 

*  Brece  Trattalo  dt^e  cause  che  possono  far  abondare  li  regni  (Toro  et  d'argento  dovt 
turn  Kono  miniere 


INTRODUCTION.  XXXJ 

induce  a  belief  that  he  had  been  assisted  in  the  composi- 
tion of  his  work  by  the  abbe  Intieri  and  the  Marquess  of 
Rinuccini.  Its  merits,  however,  appear  to  be  of  a  descrip- 
tion similar  to  those  the  author's  writings  always  after- 
wards displayed ;  genius  united  with  erudition,  careful- 
ness in  uniformly  ascending  to  the  nature  of  things ;  and 
an  animated  and  elegant  style. 

One  of  the  most  striking  peculiarities  of  this  work,  is 
its  containing  some  of  the  rudiments  of  the  doctrine  of 
Adam  Smith ;  among  others,  that  labour  is  the  sole  crea- 
tor of  the  value  of  things  or  of  wealth  ;*  a  principle  al- 
though not  rigorously  true,  as  will  be  made  manifest  in 
the  course  of  this  work,  but  which,  pushed  to  its  ultimate 
consequences,  would  have  put  Galiani  in  the  way  of  dis- 
covering and  completely  unfolding  the  phenomena  of  pro- 
duction. Dr.  Smith,  who  was  about  the  same  time  a  pro- 
fessor in  the  university  of  Glasgow,  and  then  taught  this 
doctrine,  which  has  since  acquired  so  much  celebrity,  in  all 
probability  had  no  knowledge  of  a  work  in  the  Italian  lan- 
guage, published  at  Naples  by  a  young  man  then  hardly 
known,  and  whom  he  has  never  quoted.  But  even  had  he 
known  it,  a  truth  cannot  with  so  much  propriety  be  said  to 
belong  to  its  fortunate  discoverer,  as  to  the  inquirer  who 
first  proves  that  it  must  be  so,  and  demonstrates  its  con- 
sequences. Although  the  existence  of  universal  gravitation 
had  been  previously  conjectured  by  Kepler  and  Pascal, 
the  discovery  does  not  the  less  belong  to  Newton.t 

*  "  Entro  ora  a  dire  della  factica,  la  quale,  non  solo  in  tute  le  opere  que  sono  intiera 
mente  dell'  arte  come  le  pitture,  sculture,  intagli,  etc.,  ma  anchi  in  molti  corpi,  come 
sono  i  minerali,  i  sassi,  le  piante  spontanee  delle  selve,  etc.,  6  Tunica  che  da  valore  alia 
cosa.  La  quantita  della  materia  non  per  altro  coopera  in  questi  corpi  al  valore  se  non 
parche  aumenta  o  sema  la  fatica."  (GALIANI,  della  Moneta.  Lib.  I,  cap.  2.) 

"  In  relation  to  labour  I  will  remark,  that  not  only  in  productions  which  are  entirely 
the  work  of  art,  as  in  painting,  sculpture,  engraving,  etc.,  but  likewise  in  productions 
of  nature,  as  on  metals,  minerals,  and  plants,  their  value  is  entirely  derived  from  the 
labour  bestowed  on  their  creation.  The  quantity  of  matter  affects  the  value  of  things 
only  so  far  as  it  requires  more  or  less  labour." 

In  the  same  chapter  Galiani  also  remarks,  that  man,  that  is  to  say  his  labour1,  is  the 
only  correct  measure  of  value.  This,  also,  according  to  Dr.  Smith,  is  a  principle ;  al 
though  considered  by  me  as  an  error. 

t  This  same  Galiani  remarks,  in  the  same  work,  that  whatever  is  gained  by  some 
must  necessarily  be  lost  by  others ;  in  this  way  proving,  that  a  very  ingenious  writer 
may  not  even  know  how  to  deduce  the  most  simple  conclusions,  and  may  pass  by  the 
truth  without  perceiving  it.  For,  if  wealth  can  be  created  by  labour,  there  may  then  be 
a  new  description  of  wealth  in  the  world,  not  taken  from  anybody.  Indeed,  this  author 
in  his  Dialogues  on  the  Corn  Trade,  published  in  France  a  long  time  afterwards,  haa 
himself,  in  a  very  peculiar  manner,  pronounced  his  own  condemnation.  "A  truth," 
*je  observes,  "  which  is  brought  to  light  by  pure  accident,  like  a  mushroom  in  a  me* 


XXX11  INTRODUCTION. 

In  Spain,  Alvarez  Osorio,  and  Martinez-de-mata,  have 
delivered  discourses  on  political  economy,  the  publication 
of  which  we  owe  to  the  enlightened  patriotism  of  Campo- 
manes.  Moncada,  Navarette,  Ustaritz,  Ward,  and  £7//oet, 
have  written  on  the  same  subject.  These  esteemed 
authors,  like  those  of  Italy,  entertained  many  sound  views, 
verified  various  important  facts,  and  supplied  a  number  of 
laborious  calculations  ;  but  from  their  inability  to  estab- 
lish them  upon  fundamental  principles  of  the  science,  which 
were  not  then  known,  they  have  often  been  mistaken  both 
as  to  the  end  as  well  as  the  means  of  prosecuting  this 
study  ;  amidst  a  variety  of  useless  disquisitions,  have  only 
cast  an  uncertain  and  deceptive  light.* 

In  France,  the  science  of  political  economy,  at  first,  was 
only  considered  in  its  application  to  public  finances.  Sully 
remarks  correctly  enough,  that  agriculture  and  commerce 
are  the  two  teats  of  the  state ;  but  from  a  vague  and  in- 
distinct conception  of  the  truth.  The  same  observation 
may  be  applied  to  Vauban,  a  man  of  a  sound  practical 
mind,  and  although  in  the  army,  a  philosopher  and  friend 
of  peace,  who,  deeply  afflicted  with  the  misery  into  which 
his  country  had  been  plunged  by  the  vain-glory  of  Louis 
XIV.,  proposed  a  more  equitable  assessment  of  the  taxes, 
as  a  means  of  alleviating  the  public  burdens. 

Under  the  influence  of  the  regent,  opinions  became 
unsettled ;  bank-notes,  supposed  to  be  an  inexhaustible 
source  of  wealth,  were  only  the  means  of  swallowing  up. 
capital,  of  expending  what  had  never  been  earned,  and  of 
making  a  bankruptcy  of  all  debts.  Moderation  and  eco- 
nomy were  turned  into  ridicule.  The  courtiers  of  the 
prince,  either  by  persuasion  or  corruption,  encouraged 
him  in  every  species  of  extravagance.  At  this  period,  the 
maxim  that  a  state  is  enriched  by  luxury  was  reduced  to 
system.  All  the  talents  and  wit  of  the  day  were  exerted 
in  gravely  maintaining  such  a  paradox  in  prose,  or  in  em- 
bellishing it  with  the  more  attractive  charms  of  poetry. 

How,  is  of  no  value ;  we  cannot  make  use  of  it,  if  we  are  ignorant  of  its  origin  and  con- 
nequences ;  or  how  and  by  what  chain  of  reasoning-  it  is  derived." 

*  From  my  own  inability  of  judging  of  the  merits  of  such  of  these  writers  whose 
works  have  not  been  translated,  I  havo  availed  myself  of  the  opinions  of  one  of  tho 
translators  of  this  Treatise  into  the  Spanish  language,  Don  Jose  Queypo,  an  individual 
•like  distinguished  by  his  abilities  and  patriotism,  whose  remarks  I  have  only  copied 


INTRODUCTION. 

The  dissipation  of  the  national  treasures  was  really  sup- 
posed to  merit  the  public  gratitude.  The  ignorance  of 
first  principles,  with  the  debauchery  and  licentiousness  of 
the  duke  of  Orleans,  conspired  to  effect  the  ruin  of  the 
kingdom.  During  the  long  peace  maintained  by  cardinal 
Fleury,  France  recovered  a  little ;  the  insignificant  ad- 
ministration of  this  weak  minister  at  least  proving,  that 
the  ruler  of  a  nation  may  achieve  much  good  by  abstain- 
ing from  the  commission  of  evil. 

The  steadily  increasing  progress  of  different  branches 
of  industry,  the  advancement  of  the  sciences,  whose  in- 
fluence upon  wealth  we  shall  have  occasion  hereafter  to 
notice,  and  the  direction  of  public  opinion,  at  length  esti- 
mating national  prosperity  as  being  of  some  importance, 
caused  the  science  of  political  economy  to  enter  into  the 
contemplation  of  a  great  number  of  writers.  Its  true 
principles  were  not  then  known ;  but  since,  according  to 
the  observation  of  Fontenelle,  our  condition  is  such,  that 
we  are  not  permitted  at  once  to  arrive  at  the  truth,  but 
must  previously  pass  through  various  species  of  errors 
and  various  grades  of  follies,  ought  these  false  steps  to  be 
considered  as  altogether  useless,  which  have  taught  us  to 
advance  with  more  steadiness  and  certainty? 

Montesquieu,  who  was  desirous  of  considering  laws  in  all 
their  relations,  inquired  into  their  influence  on  national 
wealth.  The  nature  and  origin  of  wealth  he  should  first 
have  ascertained  ;  of  which,  however,  he  did  not  form  any 
opinion.  We  are,  nevertheless,  indebted  to  this  distin- 
guished author  for  the  first  philosophical  examination  of 
the  principles  of  legislation ;  and,  in  this  point,  of  view, 
he,  perhaps,  may  be  considered  as  the  master  of  the 
English  writers,  who  are  so  generally  esteemed  as  being 
ours ;  just  in  the  same  manner  as  Voltaire  has  been  the 
master  of  their  best  historians,  who  now  furnish  us  with 
models  worthy  of  imitation. 

About  the  middle  of  the  eighteenth  century,  certain 
principles  in  relation  to  the  origin  of  wealth,  advanced  by 
Doctor  Qnesnay,  made  a  great  number  of  proselytes.  The 
enthusiastic  admiration  manifested  by  these  persons  for 
the  founder  of  their  doctrines,  the  scrupulous  exactness 
with  which  they  have  uniformly  since  followed  the  same 


INTRODUCTION. 

dogmas,  and  the  energy  and  zeal  they  displayed  in  main- 
taining them,  have  caused  them  to  be  considered  as  a  sect, 
which  has  received  the  name  of  economists.  Instead  of 
first  observing  the  nature  of  things,  or  the  manner  in 
which  they  take  place,  of  classifying  these  observations, 
and  deducing  from  them  general  propositions,  they  com- 
menced by  laying  down  certain  abstract  general  proposi- 
tions, which  they  styled  axioms,  from  supposing  them  to 
contain  inherent  evidence  of  their  own  truth.  They  then 
endeavoured  to  accommodate  the  particular  facts  to  them, 
and  to  infer  from  them  their  laws ;  thus  involving  them- 
selves in  the  defence  of  maxims  evidently  at  variance  with 
common  sense  and  universal  experience,*  as  will  appear 
hereafter  in  various  parts  of  this  work.  Their  opponents 
had  not  themselves  formed  any  more  correct  views  of  the 
subjects  in  controversy.  With  considerable  learning  and 
talents  on  both  sides,  they  were  either  wrong  or  right  by 
chance.  Points  were  contested  that  should  have  been 
conceded,  and  opinions,  unquestionably  false,  acquiesced 
in  ;  in  short,  they  combated  in  the  clouds.  Voltaire,  who 
so  well  knew  how  to  detect  the  ridiculous,  wherever  it 
was  to  be  found,  in  his  Hommeaux  guarante  ecus,  satirised 
tue  system  of  the  economists;  yet,  in  exposing  the  tire- 
some trash  of  Mercer  de  la  Riviere,  and  the  absurdities 
contained  in  Mirabeau's  ISami  des  Hommes,  he  was  him- 
self unable  to  point  out  the  errors  of  either. 

The  economists,  by  promulgating  some  important  truths, 
directing  a  more  general  attention  to  objects  of  public 
utility,  and  by  exciting  discussions,  which,  although  at 
that  time  of  no  advantage,  subsequently  led  to  more  ac- 
curate investigations,  have  unquestionably  done  much 
good.t  In  representing  agricultural  industry  as  produc- 
tive of  wealth,  they  were  not  deceived;  and,  perhaps,  the 
necessity  they  were  in  of  unfolding  the  nature  of  produc- 
tion, caused  the  further  examination  of  this  important  phe- 
nomenon, which  conducted  their  successors  to  its  entire 

*  When  they  maintain,  for  example,  that  a  fall  in  the  price  of  food  is  a  public  calamity. 

t  Among  the  discussions  they  provoked,  we  must  not  forget  the  entertaining  Dia- 
iDgues  on  the  Corn  Trade,  by  the  abb6  Galiani,  in  which  the  science  of  political  econo- 
my is  treated  in  the  humorous  manner  of  Tristram  Shandy.  An  important  truth  is 
asserted,  and  when  the  author  is  called  upon  for  its  proof,  he  replies  with  some  ingenious 
pleasantry. 


INTRODUCTION.  xxxv 

development.  On  the  other  hand,  the  labours  of  the  eco- 
nomists have  been  attended  with  serious  evils ;  the  many 
useful  maxims  they  decried,  their  sectarian  spirit,  the  dog- 
matical and  abstract  language  of  the  greater  part  of  their 
writings,  and  the  tone  of  inspiration  pervading  them,  gave 
currency  to  the  opinion,  that  all  who  were  engaged  in 
such  studies  were  but  idle  dreamers,  whose  theories,  at 
best  only  gratifying  literary  curiosity,  were  wholly  inap- 
plicable in  practice.* 

No  one,  however,  has  ever  denied  that  the  writings  of 
the  economists  have  uniformly  been  favourable  to  the 
strictest  morality,  and  to  the  liberty  which  every  human 
being  ought  to  possess,  of  disposing  of  his  person,  fortune, 
and  talents,  according  to  the  bent  of  his  inclination  ;  with- 
out which,  indeed,  individual  happiness  and  national  pros- 
perity are  but  empty  and  unmeaning  sounds.  These 
opinions  alone  entitle  their  authors  to  universal  gratitude 
and  esteem.  I  do  not,  moreover,  believe  that  a  dishonest 
man  or  bad  citizen  can  be  found  among  their  number.  H 

f  \j 

This  doubtless  is  the  reason  why,  since  the  year  1760, 
almost  all  the  French  writers  of  any  celebrity  on  subjects 
connected  with  political  economy,  without  absolutely  being 
enrolled  under  the  banners  of  the  economists,  have,  never- 
theless, been  influenced  by  their  opinions.  Raynal,  Con- 
dorcet,  and  many  others,  will  be  found  among  this  number. 
Condillac  may  also  be  enumerated  among  them,  notwith- 
standing his  endeavours  to  found  a  system  of  his  own  in 
relation  to  a  subject  which  he  did  not  understand.  Many 
useful  hints  may  be  collected  from  amidst  the  ingenious 

*The  belief  that  moral  and  political  science  is  fqunded  upon  chimerical  theories, 
arises  chiefly  from  our  almost  continually  confounding1  questions  of  right  with  matters 
of  fact.  Of  what  consequence,  for  instance,  is  the  question  so  long  agitated  in  the 
writings  of  the  economists,  whether  the  sovereign  power  in  a  country  is,  or  is  not,  the 
co-proprietor  of  the  soil  ?  The  fact  is,  that  in  every  country  the  government  takes,  or 
in  the  shape  of  taxes  the  people  are  compelled  to  furnish  it  with,  a  part  of  the  revenue 
diawn  from  real  estate.  Here  then  is  a  fact,  and  an  important  one;  the  consequence 
of  certain  facts,  which  we  can  trace  up,  as  the  cause  of  other  facts  (such  as  the  rise  in 
the  price  of  commodities)  to  which  we  are  led  with  certainty.  Questions  of  right  are 
always  more  or  less  matters  of  opinion ;  matters  of  fact,  on  the  contrary,  are  susceptible 
of  proof  and  demonstration.  The  former  exercise  but  little  influence  over  the  fortunes 
of  mankind  ;  while  the  latter,  inasmuch  as  facts  grow  out  of  each  other,  are  deeply  in- 
teresting to  them ;  and,  as  it  is  of  importance  to  us  that  some  results  should  take  place 
in  preference  to  others,  it  is,  therefore,  essential  to  ascertain  the  means  by  which  theso 
may  be  obtained.  The  Social  Contract  of  J.  J.  Rousseau,  from  being  almost  entirely 
founded  upon  questions  of  right,  has  thereby  become,  what  I  feel  no  hesitation  in  avow 
ing,  a  work  of  at  least  but  little  practical  utility. 


INTRODUCTION. 

trifling  of  his  work;*  but,  like  the  economists,  he  almost 
invariably  founds  a  principle  upon  some  gratuitous  assump- 
tion. Now,  an  hypothesis  may  indeed  be  resorted  to,  in 
order  to  exemplify  and  elucidate  the  correctness  of  an 
author's  general  reasoning,  but  never  can  be  sufficient  to 
establish  a  fundamental  truth.  Political  economy  has  only 
become  a  science  since  it  has  been  confined  to  the  results 
of  inductive  investigation. 

Turgot  was  himself  too  good  a  citizen,  not  sincerely  to 
esteem  as  good  citizens  as  the  economists;  and  accord- 
ingly, when  in  power,  he  deemed  it  advantageous  to  coun- 
tenance them.  The  economists,  in  their  turn,  found  their 
account  in  passing  off  so  enlightened  an  individual  and 
minister  of  state  as  one  of  their  adepts ;  the  opinions  of 
Turgot,  however,  were  not  borrowed  from  their  school, 
but  derived  from  the  nature  of  things ;  and  although  on 
many  important  points  of  doctrine  he  may  have  been  de- 
ceived, the  measures  of  his  administration,  either  planned 
or  executed,  are  amongst  the  most  brilliant  ever  conceived 
by  any  statesman.  There  cannot,  therefore,  be  a  stronger 
proof  of  the  incapacity  of  his  sovereign,  than  his  inability 
to  appreciate  such  exertions,  or  if  capable  of  appreciating 
them,  in  not  knowing  how  to  afford  them  support. 

The  economists  not  only  exercised  a  particular  sway 
over  French  writers,  but  also  had  a  very  remarkable  in- 
fluence  over  many  Italian  authors,  who  even  went  beyond 
them.  Beccaria,  in  a  course  of  public  lectures  at  Milan,t 
first  analysed  the  true  functions  of  productive  capital. 
The  Count  de  Fern,  the  countryman  and  friend  of  Beccaria, 
and  worthy  of  being  so,  both  a  man  of  business  and  an 
accomplished  scholar^  in  his  Meditazione  suW  Economia 
politico.,  published  in  1771,  approached  nearer  than  any 
other  writer,  before  Dr.  Smith,  to  the  real  laws  which 
regulate  the  production  and  consumption  of  wealth.  Fi- 
langicri,  whose  treatise  on  political  and  economical  laws 
was  not  given  to  the  public  until  the  year  1780,  appears 
not  to  have  been  acquainted  with  the  work  of  Dr.  Smith, 

*  Du  Commerce  et  du  Gouverncment  consideres  Vun  relativement  a  Vautre. 

'f  See  the  syllabus  of  his  lectures,  which  was  printed  for  the  first  time  in  the  year  1804, 
in  the  valuable  collection  published  at  Milan  by  Pietro  Custodi,  under  the  title  ofScrit. 
lori  classic!  italiani  di  ec:onomia  politico.  It  was  unknown  to  me  until  after  the  publi- 
cation of  the  first  cdifion  of  this  work  in  1803. 


INTRODUCTION.  XXXY11 

published  four  years  before.  The  principles  de  Verri  laid 
down  are  followed  by  Filangieri,  and  even  received  from 
him  a  more  complete  development ;  but  although  guided 
by  the  torch  of  analysis  and  deduction,  he  did  not  proceed 
from  the  most  fortunate  premises  to  the  immediate  con- 
sequences which  confirm  them,  at  the  same  time  that  they 
exhibit  their  application  and  utility. 

But  none  of  these  inquiries  could  lead  to  any  important 
result.  How,  indeed,  was  it  possible  to  become  acquainted 
with  the  causes  of  national  prosperity,  when  no  clear  or 
distinct  notions  had  been  formed  respecting  the  nature  of 
wealth  itself?  The  object  of  our  investigations  must  be 
thoroughly  perceived  before  the  means  of  attaining  it  are 
sought  after.  In  the  year  1776,  Adam  Smith,  educated  in 
that  school  in  Scotland  which  has  produced  so  many  scho- 
lars, historians,  and  philosophers,  of  the  highest  celebrity, 
published  his  Inquiry  into  the  Nature  and  Causes  of  the 
Wealth  of  Nations.  In  this  work,  its  author  demonstrated 
that  wealth  was  the  exchangeable  value  of  things ;  that 
its  extent  was  proportional  to  the  number  of  things  in  our 
possession  having  value ;  and  that  inasmuch  as  value 
could  be  given  or  added  to  matter,  that  wealth  could  be 
created  and  engrafted  on  things  previously  destitute  of 
value,  and  there  be  preserved,  accumulated,  or  destroyed.* 

In  inquiring  into  the  origin  of  value,  Dr.  Smith  found  it 
to  be  derived  from  the  labour  of  man,  which  he  ought  to 
have  denominated  industry,  from  its  being  a  more  com- 
prehensive and  significant  term  than  labour.  From  this 
fruitful  demonstration  he  deduced  numerous  and  impor- 
tant conclusions  respecting  the  causes  which,  from  check- 
ing the  development  of  the  productive  powers  of  labour, 
are  prejudicial  to  the  growth  of  wealth ;  and  as  they  are 

*  During-  the  same  year  that  Dr.  Smith's  work  appeared,  and  immediately  before  its 
publication,  Browne  Di<rnan  published  in  London,  written  in  the  French  language,  his 
Essai  sur  le.s  principes  de  I'Economie  publique,  containing  the  following  remarkable 
passage:  "The  class  of  reproducers  includes  all  who,  uniting  their  labour  to  that  of  the 
vegetative  power  of  the  soil,  or  modifying  the  productions  of  nature  in  the  processes  of 
their  several  arts,  create  in  some  sort  a  new  value,  of  which  the  sum  total  fornib  what  is 
called  -the  annual  reproduction." 

This  striking  passage,  in  which  reproduction  is  more  clearly  characterised  than  in 
any  part  of  Dr.  Smith'.;  writings,  did  not  lead  its  author  to  any  important  conclusions, 
but  merely  gave  birth  to  a  few  scattered  hints.  A  want  of  connexion  in  his  views,  and 
of  precision  in  his  terms,  have  rendered  his  Essay  so  vague  and  obscure,  that  no  in- 
fiiruelion  whatever  can  be  derived  from  it. 

4  •* 


INTRODUCTION. 

rigorous  deductions  from  an  indisputable  principle,  they 
have  only  been  assailed  by  individuals,  either  too  careless 
to  have  thoroughly  understood  the  principle,  or  of  such 
perverted  understandings  as  to  be  wholly  incapable  of 
seizing  the  connexion  or  relation  between  any  two  ideas. 
Whenever  the  Inquiry  into  the  Wealth  of  Nations  is 
perused  with  the  attention  it  so  well  merits,  it  will  be  per- 
ceived that  until  the  epoch  of  its  publication,  the  science 
of  political  economy  did  not  exist. 

From  tlys  period,  gold  and  silver  coins  were  considered 
'  as  only  constituting  a  portion,  and  but  a  small  portion, 
of  national  wealth ;  a  portion  the  less  important,  because 
less  susceptible  of  increase,  and  because  their  uses  can 
be  more  easily  supplied  than  those  of  many  other  articles 
equally  valuable;  and  hence  it  results  that  a  community, 
as  well  as  its  individual  members,  are  in  no  way  interested 
in  obtaining  metallic  money  beyond  the  extent  of  this 
limited  demand. 

These  views,  we  conceive,  first  enabled  Dr.  Smith  to 
ascertain,  in  their  whole  extent,  the  true  functions  of 
money,  and  the  applications  of  them,  which  he  made  to 
bank-notes  and  paper  money,  are  of  the  utmost  impor- 
tance in  practice.  They  afforded  him  the  means  of  de- 
monstrating, that  productive  capital  does  not  consist  of  a 
sum  of  money,  but  in  the  value  of  the  objects  made  use 
of  in  production.  He  arranged  and  analyzed  the  ele- 
ments of  which  productive  capital  is  composed,  and 
pointed  out  their  true  functions.* 

Many  principles  strictly  correct  had  often  been  ad- 
vanced prior  to  the  time  of  Dr.  Smith  ;t  he,  however,  was 
the  first  author  who  established  their  truth.  Nor  is  this 

*  This  difficult  and  abstruse  subject  has  not,  perhaps,  been  treated  by  Dr.  Smith  with 
sufficient  method  and  perspicuity.  Owing-  to  this  circumstance,  his  intelligent  and  acute 
countryman,  lord  Lauderdale,  has  composed  an  entire  treatise,  in  order  to  prove  that 
his  lordship  had  completely  failed  in  comprehending  this  part  of  the  Wealth  of  Nations. 

t  In  the  article  Grains,  in  the  Encyclopedic,  Quesnay  had  remarked,  that  "  commo- 
dities which  can  6e  sold,  ought  always  to  be  considered  without  distinction,  either  as 
oecuniary  or  real  wealth,  applicable  to  the  purposes  of  whoever  may  make  use  of  it." 
This,  in  reality,  is  Dr.  Smith's  exchangeable  value.  De  Verri  had  observed,  (chapter 
'1 )  that  reproduction  was  nothing  more  than  the  reproduction  of  value,  and  that  the  value 
af  things  constituted  wealth.  Galiani,  as  has  been  already  noticed,  had  said,  that  labour 
was  the  source  of  all  value  ;  but  Dr.  Smith,  nevertheless,  made  these  views  his  own  by 
exhibiting',  as  we  see,  their  connexion  with  all  the  other  important  phenomena,  and  in 
demonstrating  them  even  by  their  consequences. 


INTRODUCTION.  XXX1X 

all.  He  has  furnished  us,  also,  with  the  true  method  of 
detecting  errors ;  he  has  applied  to  political  economy  tlie 
new  mode  of  scientific  investigation,  namely,  of  not  look- 
ing for  principles  abstractedly,  but  by  ascending  from 
facts  the  most  constantly  observed,  to  the  general  laws 
which  govern  them.  As  every  fact  may  be  said  to  have 
a  particular  cause,  it  is  in  the  spirit  of  system  to  deter- 
mine the  cause ;  it  is  in  the  spirit  of  analysis,  to  be  soli- 
citous to  know  why  a  particular  cause  has  produced  this 
effect,  in  order  to  be  satisfied  that  it  could  not  have  been 
produced  by  any  other  cause.  The  work  of  Dr.  Smith  is 
a  succession  of  demonstrations,  which  has  elevated  many 
propositions  to  the  rank  of  indisputable  principles,  and 
plunged  a  still  greater  number  into  that  imaginary  gulph, 
into  which  extravagant  hypotheses  and  vague  opinions 
for  a  certain  period  struggle,  before  being  forever  swal- 
lowed up. 

It  has  been  said  that  Dr.  Smith  was  under  heavy  obli- 
gations to  Stewart*  an  author  whom  he  has  not  once 
quoted,  even  for  the  purpose  of  refuting  him.  I  cannot 
perceive  in  what  these  obligations  consist.  In  the  con- 
ception of  his  subject,  Dr.  Smith  displays  the  elevation 
and  comprehensiveness  of  his  views,  whilst  the  researches 
of  Stewart  exhibit  but  a  narrow  and  insignificant  scope. 
Stewart  has  supported  a  system  already  maintained  by 
Colbert,  adopted  afterwards  by  all'the  French  writers  on 
commerce,  and  steadily  followed  by  most  European 
governments ;  a  system  which  considers  national  wealth 
as  depending,  not  upon  the  sum  total  of  its  productions; 
but  upan  the  amount  of  its  sales  to  foreign  countries. 
One  of  the  most  important  portions  of  Dr.  Smith's  work- 
is  devoted  to  the  refutation  of  this  theory.  If  he  has  not 
particularly  refuted  Stewart,  it  is  from  the  latter  not  being 
considered  by  him  as  the  father  of  his  school,  and  from 
having  deemed  it  of  more  importance  to  overthrow  an 
opinion,  then  universally  received,  than  to  confute  the 
doctrines  of  an  author,  which  in  themselves  contained 
nothing  peculiar. 

The  economists  have  also  pretended,  that  Dr.  Smith 

*  Sir  James  Stewart,  author  of  a  Treatise  on  Political  Economy. 


*1  INTRODUCTION.  • 

if 

was  under  obligations  to  them.  But  to  what  do  such  pre 
tensions  amount  ?  A  man  of  genius  is  indebted  to  every- 
thing around  him ;  to  the  scattered  lights  which  he  has 
concentrated,  to  the  errors  which  he  has  overthrown,  and 
even  to  the  enemies  by  whom  he  has  been  assailed^  inas- 
much as  they  all  contribute  to  the  formation  of  his  opin- 
ions. But  when  out  of  these  materials  he  afterwards  em- 
bodies enlarged  views,  useful  to  his  contemporaries  and 
posterity,  it  rather  behoves  us  to  acknowledge  the  extent 
of  our  own  obligations,  than  to  reproach  him  with  what 
he  has  been  supplied  by  others.  Moreover,  Dr.  Smith  has 
not  been  backward  in  acknowledging  the  advantages  he 
had  derived  from  his  intercourse  with  the  most  enlighten- 
ed men  in  France,  and  from  his  intimate  correspondence 
with  his  friend  and  countryman  Hume,  whose  essays  on 
political  economy,  as  well  as  on  various  other  subjects, 
contain  so  many  just  views. 

After  having  shown,  as  fully  as  so  rapid  a  sketch  will 
permit,  the  improvement  which  the  science  of  political 
economy  owes  to  Dr.  Smith,  it  will  not,  perhaps,  be  use- 
less to  indicate,  in  as  summary  a  manner,  some  of  the 
points  on  which  he  has  erred,  and  others  which  he  has 
left  to  be  elucidated. 

To  the  labour  of  man  alone  he  ascribes  the  power  of 
producing  values.  This  is  an  error.  A  more  exact  ana- 
lysis demonstrates,  as  will  be-  seen  in  the  course  of  this 
work,  that  all  values  are  derived  from  the  operation  of 
labour,  or  rather  from  the  industry  of  man,  combined  with 
the  operation  of  those  agents  which  nature  and  capital 
furnish  him.  Dr.  Smith  did  not,  therefore,  obtain  a 
•  thorough  knowledge  of  the  most  important  phenomenon 
in  production ;  this  has  led  him  into  some  erroneous  con- 
clusions, such,  for  instance,  as  attributing  a  gigantic  in- 
fluence to  the  division  of  labour,  or  rather  to  the  separa- 
tion of  employments.  This  influence,  however,  is  by  no 
means  inappreciable  or  even  inconsiderable ;  but  the 
greatest  wonders  of  this  description,  are  not  so  much 
owing  to  any  peculiar  property  in  human  labour,  as  to  the 
uso  we  make  of  the  powers  of  nature.  His  ignorance  of 
ihis  principle  precluded  him  from  establishing  the  true 


INTRODUCTION.  x|j 

theory  of  machinery  in  relation  to  the  production  of 
wealth. 

The  phenomena  of  production  being  now  better  known 
than  they  were  in  the  time  of  Dr.  Smith,  have  enabled 
his  successors  to  distinguish,  and  to  assign  the  difference 
found  to  exist,  between  a  real  and  a  relative  rise  in  prices  ;* 
a  difference  which  furnishes  the  solution  of  numerous 
problems,  otherwise  wholly  inexplicable.  Such,  for  exam- 
ple, as  the  following :  Does  a  tax,  or  any  other  impost,  by 
enhancing  the  price  of  commodities,  increase  the  amount  of 
wealth  /*t  The  income  of  the  producer  arising  from  the  cost 
of  production,  why  is  not  this  income  impaired  by  a  diminu- 
tion in  the  cost  of  production  ?  Now  it  is  the  power  of  re- 
solving these  abstruse  problems  which,  nevertheless,  con- 
stitutes the  science  of  political  economy.:}: 

By  the  exclusive  restriction  of  the  term  wealth  to  values 
fixed  and  realized  in  material  substances,  Dr.  Smith  has 

*  See  Chapter  third,  Book  second. 

t  Dr.  Smith  has,  in  a  satisfactory  manner,  established  the  difference  between  the  real 
and  nominal  prices  of  things,  that  is  to  say,  between  the  quantity  of  real  values  which 
must  be  given  to  obtain  a  commodity,  and  the  name  which  is  given  to  the  sum  of  these 
values.  The  difference  here  alluded  to,  arises  from  a  more  perfect  analysis,  in  which 
the  real  price  itself  is  decomposed. 

t  It  is  not,  for  example,  until  after  the  manner  in  which  production  takes  place  ia 
thoroughly  understood,  that  we  can  say  how  far  the  circulation  of  money  and  commo- 
dities has  contributed  towards  it,  and  consequently  what  circulation  is  useful,  and  what 
is  not ;  otherwise,  we  should  only  talk  nonsense,  as  is  daily  done,  respecting  the  utility 
of  a  quick  circulation.  My  being  obliged  to  furnish  a  chapter  on  this  subject  (Book  I. 
Chap.  16.)  must  be  attributed  to  the  inconsiderable  advancement  made  in  the  science  of 
political  economy,  and  to  the  consequent  necessity  of  directing  our  attention  to  some 
of  its  more  simple  applications.  The  same  remark  is  applicable  to  the  twentieth  chap- 
ter, in  the  same  book,  on  the  subject  of  temporary  and  permanent  emigration,  consider- 
ed in  reference  to  national  wealth.  Any  person,  however,  well  acquainted  with  the  prin- 
ciples of  this  science,  would  find  no  difficulty  in  arriving  at  the  same  conclusions. 

The  time  is  not  distant  when  not  only  writers  on  finance,  but  on  history  and  geogra- 
phy, will  be  required  to  possess  a  knowledge  of  at  least  the  fundamental  principles  of 
political  economy.  A  modern  treatise  on  Universal  Geography,  (vol.  2,  page  602,)  a 
work  in  other  respects  denoting  extensive  research  and  information,  contains  the  follow 
ing  passage  :  "  The  number  of  inhabitants  of  a  country  is  the  basis  of  every  good  sys 
tern  of  finance ;  the  more  numerous  is  its  population,  the  greater  height  will  its  com- 
merce and  manufactures  attain ;  and  the  extent  of  its  military  force  be  in  proportion 
to  the  amount  of  its  population."  Unfortunately,  every  one  of  these  positions  may  be 
erroneous.  National  revenue,  necessarily  consisting  either  of  the  income  of  the  public 
property,  or  of  the  contributions,  in  the  shape  of  taxes,  drawn  from  the  incomes  of  in- 
dividuals, docs  not  depend  upon  the  number,-  but  upon  the  wealth,  and  above  all,  upon 
the  incomes  of  the  people.  Now,  an  indigent  multitude  has  the  fewer  contributions  to 
yield,  the  more  mouths  it  has  to  feed.  It  is  not  the  numerical  population  of  a  state,  but 
the  capital  and  genius  of  its  inhabitants,  that  most  conduce  to  the  advancement  of  its 
commerce ;  these  benefit  population  much  more  than  they  are  benefited  by  it.  Finally, 
the  number  of  troops  a  government  can  maintain  depends  still  less  upon  the  extent  of 
its  population  than  upon  its  revenues ;  and  it  has  been  already  seen  that  revenue  is  not 
dependent  upon  population. 

4+  F 


&]il  INTRODUCTION. 

narrowed  the  boundary  of  this  science.  He  should,  also, 
have  included  under  its  values  which,  although  immaterial, 
are  not  less  real,  such  as  natural  or  acquired  talents.  Of 
two  individuals  equally  destitute  of  fortune,  the  one  in 
possession  of  a  particular  talent  is  by  no  means  so  poor 
as  the  other.  Whoever  has  acquired  a  particular  talent 
at  the  expense  of  an  annual  sacrifice,  enjoys  an  accumu- 
lated capital;  a  description  of  wealth,  notwithstanding  its 
immateriality,  so  little  imaginary,  that,  in  the  shape  of 
professional  services,  it  is  daily  exchanged  for  gold  and 
silver. 

Dr.  Smith,  who  with  so  much  sagacity  unfolds  the  man- 
ner in  which  production  takes  place,  and  the  peculiar  cir- 
cumstances accompanying  it  in  agriculture  and  the  arts, 
on  the  subject  of  commercial  production  presents  us  with 
only  obscure  and  indistinct  notions.  He,  accordingly,  was 
unable  to  point  out  with  precision,  the  reason  why,  and 
the  extent  to  which,  facilities  of  communication  are  con- 
ducive to  production. 

He  did  not  subject  to  a  rigid  analysis  the  different  ope- 
rations comprehended  under  the  general  name  of  industry, 
or  as  he  calls  it,  of  labour,  and,  therefore,  could  not  appre- 
ciate the  peculiar  importance  of  each  in  the  business  of 
production. 

His  work  does  not  furnish  a  satisfactory  or  well  con- 
nected account  of  the  manner  in  which  wealth  is  distri- 
buted in  society ;  a  branch  of  political  economy,  it  may 
be  remarked,  opening  an  almost  new  field  for  cultivation. 
The  too  imperfect  views  of  economical  writers  respecting 
the  production  of  wealth  precluded  them  from  forming 
any  accurate  notions  in  relation  to  its  distribution.* 

Finally,  although  the  phenomena  of  the  consumption  of 
wealth  are  but  the  counterpart  of  its  production,  and 
although  Dr.  Smith's  doctrine  leads  to  its  correct  exami- 
nation, he  did  not  himself  develope  it ;  which  precluded 
him  from  establishing  numerous  important  truths.  Thus, 
by  not  characterizing  the  two  different  kinds  of  consump- 
tion, namely,  unproductive  and  reproductive,  he  does  not 

*  Witness  Turffofs  Reflections  sur  la  formation  et  la  distribution  ties  richesses,  in 
which  lie  has  introduced  various  views  on  both  these  subjects,  either  entirely  erroneous, 
r  very  imperfect. 


INTRODUCTION. 

satisfactorily  demonstrate,  that  the  consumption  of  values 
saved  and  accumulated  in  order  to  form  capital,  is  as  per- 
fect as  the  consumption  of  values  which  are  dissipated. 
The  better  we  become  acquainted  with  political  economy, 
the  more  correctly  shall  we  appreciate  the  importance  of 
the  improvements  this  science  has  received  from  him,  as 
well  as  those  he  left  to  be  accomplished.* 

Such  are  the  principal  imperfections  of  the  Inquiry  into 
the  Nature  and  Causes  of  the  Wealth  of  Nations,  in  rela- 
tion to  its  fundamental  doctrines.  The  plan  of  the  work, 
or,  in  other  words,  the  manner  in  which  these  doctrines 
are  unfolded,  is  liable  to  no  less  weighty  objections. 

In  many  places  the  author  is  deficient  in  perspicuity, 
and  the  work  almost  throughout  is  destitute  of  method. 
To  understand  him  thoroughly,  it  is  necessary  to  accus- 
tom one's  self  to  collect  and  digest  his  views ;  a  labour, 
at  least  in  respect  to  some  passages,  he  has  placed  beyond 
the  reach  of  most  readers ;  indeed,  so  much  so,  that  per- 
sons otherwise  enlightened,  professing  both  to  comprehend 
and  admire  his  doctrines,  have  written  on  subjects  he  has 
discussed,  namely,  on  taxes  and  bank-notes  as  supple- 
mentary to  money,  without  having  understood  any  part 
of  his  theory  on  these  points,  which,  nevertheless,  forms 
one  of  the  most  beautiful  portions  of  his  Inquiry. 

His  fundamental  principles,  too,  are  not  established  in 
the  chapters  assigned  to  their  development.  Many  of 
them  will  be  found  scattered  through  the  two  excellent 
refutations  of  the  exclusive  or  mercantile  system  and  the 
system  of  the  economists,  but  in  no  other  part  of  the  work. 
The  principles  relating  to  the  real  and  nominal  prices  of 
things,  are  introduced  into  a  dissertation  on  the  value  of 
the  precious  metals  during  the  course  of  the  last  four  cen- 
turies ;  and  the  author's  opinions  on  the  subject  of  money 
are  contained  in  the  chapter  on  commercial  treaties. 

Dr.  Smith's  long  digressions,  have,  moreover,  with  great 
propriety,  been  much  censured.  An  historical  account 
of  a  particular  law  or  institution  as  a  collection  of  facts, 
is  in  itself,  doubtless,  highly  interesting ;  but  in  a  work 
devoted  to  the  support  and  illustration  of  general  princi- 

*  Many  other  points  of  doctrine,  besides  those  here  noticed,  have  been  either  over- 
looked, or  but  imperfectly  analyzed  by  Dr.  Smith. 


INTRODUCTION. 

pies,  particular  facts  not  exclusively  applicable  to  these 
ends,  can  only  unnecessarily  overload  the  attention.  His 
sketch  of  the  progress  of  opulence  in  the  different  nations 
of  Europe  after  the  fall  of  the  Roman  empire,  is  but  a 
magnificent  digression.  The  same  remark  is  applicable 
to  the  highly  ingenious  disquisition  on  public  education, 
replete  as  it  is  with  erudition  and  the  soundest  philosophy, 
at  the  same  time  that  it  abounds  with  valuable  instruction. 

Sometimes  these  dissertations  have  but  a  very  remote 
connexion  with  his  subject.  In  treating  of  public  expen- 
ditures, he  has  gone  into  a  very  curious  history  of  the 
various  modes  in  which  war  was  carried  on  by  different 
nations  at  different  epochs;  in  this  manner  accounting 
for  military  successes  which  have  had  so  decided  an  in- 
fluence on  the  civilization  of  many  parts  of  the  earth. 
These  long  digressions  at  times,  also,  are  devoid  of  inter- 
est to  every  other  people  but  the  English.  Of  this  descrip- 
tion is  the  long  statement  of  the  advantages  Great  Britain 
would  derive  from  the  admission  of  all  of  her  colonies  into 
the  right  of  representation  in  parliament. 

The  excellence  of  a  literary  composition  as  much  de- 
pends upon  what  it  does  not,  as  upon  what  it  does  con- 
tain. So  many  details,  although  in  themselves  useful, 
unnecessarily  encumber  a  work  designed  to  unfold  the 
principles  of  political  econohiy.  Bacon  made  us  sensible 
of  the  emptiness  of  the  Aristotelian  philosophy ;  Smith, 
in  like  manner,  caused  us  to  perceive  the  fallaciousness 
of  all  the  previous  systems  of  political  economy ;  but  the 
latter  no  more  raised  the  superstructure  of  this  science, 
than  the  former  created  logic.  To  both,  however,  our 
obligations  are  sufficiently  great,  for  having  deprived  their 
successors  of  the  deplorable  possibility  of  proceeding,  for 
any  length  of  time,  with  success  on  an  improper  route.* 

•Since  the  time  of  Dr.  Smith,  both  in  England  and  France,  a  variety  of  publications 
On  political  economy  have  made  their  appearance;  some  of  considerable  length,  but  sel- 
dom containing1  anything  worthy  of  preservation.  The  greater  part  of  them  are  of  a 
controversial  character,  in  which  the  principles  of  the  science  are  m'erely  kid  down  for 
the  purpose  of  maintaining  a  favourite  hypothesis;  but  from  which,  nevertheless,  many 
important  facts,  and  even  sound  principles,  when  they  coincide  with  the  views  of  their 
author*.,  may  be  collected.  The  "  Essai  sur  les  finances  de  la  Grand-Bretafrnf"  by 
Gentz,  and  apology  for  Mr.  Pitt's  system  of  finance,  is  of  this  description;  so  also  is 
Thornton's  Inquiry  into  the  nature  and  effects  of  paper  credit,  written  with  a  view  to  jus- 
tify the  suspension  of  cash  payments  by  the  bank  of  England ;  as  well  as  a  great  num- 
ber of  other  works  on  the  same  subject,  and  in  relation  to  the  corn  laws. 


INTRODUCTION.  xjv 

We  are,  however,  not  yet  in  possession  of  an  establish- 
ed text-book  on  the  science  of  political  economy,  in  which 
the  fruits  of  an  enlarged  and  accurate  observation  are  re- 
ferred to  general  principles,  that  can  be  admitted  by  every 
reflecting  mind ;  a  work  in  which  these  results  are  so 
complete  and  well  arranged  as  to  afford  to  each  other 
mutual  support,  and  that  may  everywhere,  and  at  all 
times,  be  studied  with  advantage.  To  prepare  myself  for 
attempting  so  useful  a  task,  I  have  thought  it  necessary 
attentively  to  peruse  what  had  been  previously  written  on 
the  same  subject,  and  afterwards  to  forget  it ;  to  study 
these  authors,  that  I  might  profit  by  the  experience  of  so 
many  competent  inquirers  who  have  preceded  me ;  to 
endeavour  to  obliterate  their  impressions,  not  to  be  mis- 
led by  any  system ;  and  at  all  times  be  enabled  freely  to 
consult  the  nature  and  course  of  things,  as  actually  exist- 
ing in  society.  Having  no  particular  hypothesis  to  sup- 
port, I  have  been  simply  desirous  of  unfolding  the  manner 
in  which  wealth  is  produced,  distributed,  and  consumed. 
A  knowledge  of  these  facts  could  only  be  acquired  by 
observing  them.  It  is  the  result  of  these  observations, 
within  the  reach  of  every  inquirer,  that  are  here  given. 
The  correctness  of  the  general  conclusions  I  have  deduced 
from  them,  every  one  can  judge  of. 

It  was  but  reasonable  to  expect  from  the  lights  of  the 
age,  and  from  that  method  of  philosophizing  which  has  so 
powerfully  contributed  to  the  advancement  of  other  sci- 
ence's, that  I  might  at  all  times  be  able  to  ascend  to  the 
nature  of  things,  and  never  lay  down  an  abstract  princi 
pie  that  was  not  immediately  applicable  in  practice ;  so 
that,  always  compared  with  well  established  facts,  any 
one  could  easily  find  its  confirmation  by  at  the  same  time 
discovering  its  utility. 

Nor  is  this  all.  Solid  general  principles,  previously  laid 
down,  must  be  noticed,  and  briefly  but  clearly  proved , 
those  which  had  not  been  laid  down  must  be  established, 
and  the  whole  so  combined,  as  to  satisfy  every  one  that 
no  material  omission  has  taken  place,  nor  any  fundamental 
point  been  overlooked.  The  science  must  be  stript  of 
many  false  opinions;  but  this  labour  must  be  confined  to 
Buch  errors  as  are  generally  received,  and  to  authors  of 


INTRODUCTION. 

acknowledged  reputation.  For  what  injury  can  an  ob- 
scure writer  or  a  discredited  dogma  effect  ?  The  utmost 
precision  must  be  given  to  the  phraseology  we  employ,  so 
as  to  prevent  the  same  word  from  ever  being  understood 
in  two  different  senses ;  and  all.  problems  be  reduced  to 
their  simplest  elements,  in  order  to  facilitate  the  detection 
of  any  errors,  and  above  all,  of  our  own.  In  fine,  the  doc- 
trines of  the  science  must  be  conveyed  in  such  a  popular* 
form,  that  every  man  of  sound  understanding  may  be  en- 
abled to  comprehend  them  in  their  whole  scope  of  conse- 
quences, and  apply  their  principles  to  all  the  various  cir- 
cumstances of  life. 

The  position  maintained  in  this  work,  that  the  value  of 
things  is  the  measure  of  wealth,  has  been  especially 
objected  to.  This,  perhaps,  has  been  my  fault ;  I  should 
have  taken  care  not  to  be  misunderstood.  The  only  sa- 
tisfactory reply  I  can  make  to  the  objection,  is  to  endea- 
vour to  give  more  perspicuity  to  this  doctrine.  I  must, 
therefore,  apologize  to  the  owners  of  the  former  editions, 
for  the  numerous  corrections  I  have  made  in  the  present 
It  became  my  duty  in  treating  of  a  subject  of  such  essen- 
tial importance  to  the  general  welfare,  to  give  it  all  the 
perfection  within  my  reach. 

Since  the  publications  of  the  former  editions  of  this 
work,  various  authors,  some  of  whom  enjoy  a  well  merited 
celebrity ,t  have  given  to  the  world  new  treatises  on  polit- 
ical economy.  It  is  not  my  province,  either  to  pronounce 
upon  the  general  character  of  these  productions,  or  to  de- 
cide whether  they  do,  or  do  not,  contain  a  full,  clear,  and 
well  digested  exposition  of  the  fundamental  principles  of 
this  science.  This  much  I  can  with  sincerity  say,  that 
many  of  these  works  contain  truths  and  illustrations  well 
calculated  greatly  to  advance  the  science,  and  from  the 

*  By  a  popular  treatise,  I  do  not  mean  a  treatise  'for  the  use  of  persons  who  neither 
know  how  to  read,  nor  to  make  any  use  of  it.  By  this  expression,  I  mean  a  treatise  not 
exclusively  addressed  to  professional  or  scientific  cultivators  of  this  particular  branch  of 
knowledge,  but  one  calculated  to  be  read  by  every  intelligent  and  useful  member  of  so 
uety. 

t  Ricardo,  Sismondi,  and  others.  The  fair  sex  begin  also  to  perceive  that  they  had 
none  themselves  injustice,  in  supposing  that  they  were  unequal  to  a  branch  of  study 
destined  to  exercise  so  benign  an  influence  over  domestic  happiness.  In  England,  a 
lady  (Mrs.  Marcel)  has  published  a  work,  Conversations  on  Political  Economy"  since 
translated  into  French,  in  which  the  soundest  principles  are  explained  in  a  familiar  and 
uleusing  style. 


INTRODUCTION.  x]vij 

perusal  of  which  I  have  derived  important  benefit.  But, 
in  common  with  every  other  inquirer,  I  am  entitled  to  re- 
mark how  far  some  of  their  principles,  which  at  first  sight 
appear  to  be  plausible,  are  contradicted  by  a  more  cau- 
tious and  rigid  induction  of  facts. 

It  is,  perhaps,  a  well  founded  objection  to  Mr.  Ricardo, 
that  he  sometimes  reasons  upon  abstract  principles  to 
which  he  gives  too  great  a  generalization.  When  once 
fixed  in  an  hypothesis  which  cannot  be  assailed,  from  its 
being  founded  upon  observations  not  called  in  question, 
he  pushes  his  reasonings  to  their  remotest  consequences, 
without  comparing  their  results  with  those  of  actual  expe- 
rience. In  this  respect  resembling  a  philosophical  me- 
chanician, who,  from  undoubted  proofs  drawn  from  the 
nature  of  the  lever,  would  demonstrate  the  impossibility 
of  the  vaults  daily  executed  by  dancers  on  the  stage.  And 
how  does  this  happen  ?  The  reasoning  proceeds  in  a 
straight  line ;  but  a  vital  force,  often  unperceived,  and 
always  inappreciable,  makes  the  facts  differ  very  far  from 
our  calculation.  From  that  instant  nothing  in  the  author's 
work  is  represented  as  it  really  occurs  in  nature.  It  is 
not  sufficient  to  set  out  from  facts ;  they  must  be  brought 
together,  steadily  pursued,  and  the  consequences  drawn 
from  them  constantly  compared  with  the  effects  observed. 
The  science  of  political  economy,  to  be  of  practical  utility, 
should  not  teach,  what  must  necessarily  take  place,  if  even 
deduced  by  legitimate  reasoning,  and  from  undoubted  pre- 
mises ;  it  must  show,  in  what  manner  that  which  in  reality 
does  take  place,  is  the  consequence  of  other  facts  equally 
certain.  It  must  discover  the  chain  which  binds  them 
together,  and  always,  from  observation,  establish  the  ex- 
istence of  the  two  links  at  their  point  of  connexion. 

With  respect  to  the  wild  or  antiquated  theories,  so 
often  produced,  or  reproduced  by  authors  who  possess 
neither  sufficiently  extensive  nor  well  digested  information 
to  entitle  them  to  form  a  sound  judgment,  the  most  effec- 
tual method  of  refuting  them  is  to  display  the  true  doc- 
trines of  the  science  with  still  greater  clearness,  and  to 
leave  to  time  the  care  of  disseminating  them.  We,  other- 
wise, should  be  involved  in  interminable  controversies, 
affording  no  instruction  to  the  enlightened  part  of  society, 


INTRODUCTION. 

and  inducing  the  uninformed  to  believe  that  nothing  ia 
susceptible  of  proof,  inasmuch  as  everything  is  made  the 
subject  of  argument  and  disputation. 

Disputants,  infected  with  every  kind  of  prejudice,  have, 
with  a  sort  of  doctorial  confidence,  remarked,  that  both 
nations  and  individuals  sufficiently  well  understand  how 
to  improve  their  fortunes  without  any  knowledge  of  the 
nature  of  wealth,  and  that  this  knowledge  is  in  itself  a 
purely  speculative  and  useless  inquiry.  This  is  but  saying 
that  we  know  perfectly  well  how  to  live  and  breathe,  with- 
out any  knowledge  of  anatomy  and  physiology,  and  that 
these  sciences  are,  therefore,  superfluous.  Such  a  propo- 
sition would  not  be  tenable ;  but  what  should  we  say  if  it 
were  maintained,  and  by  a  class  of  doctors,  too,  who, 
whilst  decrying  the  science  of  medicine,  should  themselves 
subject  you  to  a  treatment  founded  upon  antiquated  em- 
piricism and  the  most  absurd  prejudices ;  who,  rejecting 
all  regular  and  systematic  instruction,  in  spite  of  your 
remonstrances,  should  perform  upon  your  own  body  the 
most  bloody  experiments ;  and  whose  orders  should  be 
enforced  with  the  weight  and  solemnity  of  laws,  and, 
finally,  carried  into  execution  by  a  host  of  clerks  and 
soldiers  ? 

In  support  of  antiquated  errors,  it  has  also  been  said, 
"  that  there  surely  must  be  some  foundations  for  opinions, 
so  generally  embraced  by  all  mankind ;  and  that  we  our- 
selves ought  rather  to  call  in  question  the  observations 
and  reasonings  which  overturn  what  has  been  hitherto  so 
uniformly  maintained  and  acquiesced  in  by  so  many  indi- 
viduals, distinguished  alike  by  their  wisdom  and  benevo- 
lence." Such  reasoning,  it  must  be  acknowledged,  should 
make  a  profound  impression  on  our  minds,  and^even  cast 
some  doubts  on  the  most  incontrovertible  positions,  had 
we  not  alternately  seen  the  falsest  hypotheses  now  univer- 
sally recognized  as  such,  everywhere  received  and  taught 
during  a  long  succession  of  ages.  It  is  yet  but  a  very 
little  time,  since  the  rudest  as  well  as  the  most  refined  na- 
tions, and  all  mankind,  from  the  unlettered  peasant  to  the 
enlightened  philosopher,  believed  in  the  existence  of  but 
four  material  elements.  No  human  being  had  even  dreamt 
of  disputing  the  doctrine,  which  is  nevertheless  false ;  in- 


INTRODUCTION. 

somuch  that  a  tyro  in  natural  philosophy,  who  should  at 
present  consider  earth,  air,  fire,  and  water,  as  distinct  ele- 
ments, would  be  disgraced.*  How  many  other  opinions, 
as  universally  prevailing  and  as  much  respected,  will  in 
like  manner  pass  away.  There  is  something  epidemical 
in  the  opinions  of  mankind  ;  they  are  subject  to  be  attack- 
ed by  moral  maladies  which  infect  the  whole  species. 
Periods  at  length,  arrive  when,  like  the  plague,  the  disease 
wears  itself  out  and  loses  all  its  malignity  ;  but  it  still  has 
required  time.  The  entrails  of  the  victims  were  consulted 
at  Rome  three  hundred  years  after  Cicero  had  remarked, 
that  the  two  augurs  could  no  longer  examine  them  without 
laughter. 

The  contemplation  of  this  excessive  fluctuation  of 
opinions  must  not,  however,  inspire  us  with  a  belief  that 
nothing  is  to  be  admitted  as  certain,  and  thus  induce  us 
to  yield  up  to  universal  scepticism.  Facts  repeatedly  ob- 
served by  individuals  in  a  situation  to  examine  them  un- 
der all  their  aspects,  when  once  well  established  and  accu- 
rately described,  can  no  longer  be  considered  as  mere 
opinions,  but  must  be  received  as  absolute  truths.  When 
it  was  demonstrated  that  all  bodies  are  expanded  by  heat, 
this  truth  could  no  longer  be  called  in  question.  Moral 
and  political  science  present  .truths  equally  indisputable, 
but  of  more  difficult  solution.  In  these  sciences,  every 
individual  considers  himself  not  only  as  being  entitled  to* 
make  discoveries,  but  a^s  being  also  authorized  to  pro- 
nounce upon  the  discoveries  of  others;  yet  how  few  per- 
sons acquire  competent  knowledge,  and  views  sufficiently 
enlarged,  to  become  assured  that  the  subject  upon  which 
they  thus  venture  to  pronounce  judgment  is  thoroughly 
understood  by  them  in  all  its  bearings.  In  society,  one  is 
astonished  to  find  the  most  abstruse  questions  as  quickly 
decided  as  if  every  circumstance,  which,  in  any  way, 
could  and  ought  to  affect  the  decision,  were  known.  What 

O  .      ft 

"*  Every  branch  of  knowledge,  even  the  most  important,  is  but  of  very  recent  origin 
The  celebrated  writer  on  agriculture,  Arthur  Young-,  after  having  bestowed  uncommon 
pains  in  the  collection  of  all  the  observations  that  had  been  made  in  relation  to  soils,  one 
of  the  most  important  parts  of  this  science,  and  which  teaches  us  by  what  succession 
of  crops  the  earth  may  be,  at  all  times,  and  with  the  greatest  success,  cultivated,  re- 
marked,  that  he  could  not  find  that  anything  had  been  written  on  this  subject  prior  tc 
the  year  176S.  Other  arts,  not  less  essential  to  the  happiness  and  prosperity  of  society 
are  still  also  in  their  infancy 

5  G 


1  INTRODUCTION. 

would  be  said  of  a  party  passing  rapidly  in  front  of  a 
large  castle,  that  should  undertake  to  give  an  account  of 
every  thing  that  is  going  on  within  ? 

Certain  individuals,  whose  minds  have  never  caught  a 
glimpse  of  a  more  improved  state  of  society,  boldly  affirm 
that  it  could  not  exist ;  they  acquiesce  in  established  evils. 
and  console  themselves  for  their  existence  by  remarking, 
that  they,  could  not  possibly  be  otherwise ;  in  this  respect 
reminding  us  of  that  emperor  of  Japan  who  thought  he 
would  have  suffocated  himself  with  laughter,  upon  being 
told  that  the  Dutch  had  no  king.  The  Iroquois  were  at  a 
loss  to  conceive  how  wars  could  be  carried  on  with  suc- 
cess, if  prisoners  were  not  to  be  burnt. 

Although,  to  all  appearance,  many  European  nations 
may  be  in  a  flourishing  condition,  and  some  of  them  an- 
nually expend  from  one  to  two  hundred  millions  of  dollars 
solely  for  the  support  of  the  government,  it  must  not 
thence  be  inferred  that  their  situation  leaves  nothing  to  be 
desired.  A  rich  Sybarite,  residing  according  to  his  incli- 
nation, either  at  his  castle  in  the  country,  or  in  his  palace 
in  the  metropolis,  in  both,  at  an  enormous  expense,  par- 
taking of  every  luxury  that  sensuality  can  devise,  trans- 
porting himself  with  the  utmost  rapidity  and  comfort  in 
whatever  direction  new  pleasures  invite  him,  engrossing 
the  industry  and  talents  of  a  multitude  of  retainers  and 
'servants,  and  killing  a  dozen  horses  to  gratify  a  whim, 
may  be  of  opinion  that  things  gq  on  sufficiently  well,  and 
that  the  science  of  political  economy  is  not  susceptible  of 
any  further  improvement.  But  in  countries  said  to  be  in 
a  flourishing  condition,  how  many  human  beings  can  be 
enumerated,  in  a  situation  to  partake  of  such  enjoyments  ? 
One  out  of  a  hundred  thousand  at  most ;  and  out  of  a 
thousand,  perhaps  not  one  who  may  be  permitted  to  enjoy 
what  is  called  a  comfortable  independence.  The  haggard- 
ness  of  poverty  is  everywhere  seen  contrasted  with  the 
sleekness  of  wealth,  the  extorted  labour  of  some  compen- 
sating for  the  idleness  of  others,  wretched  hovels  by  the 
side  of  stately  colonnades,  the  rags  of  indigence  blended 
with  the  ensigns  of  opulence ;  in  a  word,  the  most  useless 
profusion  in  the  midst  of  the  most  urgent  wants. 


INTRODUCTION.  \{ 

Persons,  who  under  a  vicious  order  of  things  have 
obtained  a  competent  share  of  social  enjoyments,  are 
never  in  want  of  arguments  to  justify  to  the  eye  of  reason 
such  a  state  of  society ;  for  what  may  not  admit  of 
apology  when  exhibited  in  but  one  point  of  view  ?  If  the 
same  individuals  were  to-morrow  required  to  cast  anew 
the  lots  assigning  them  a  place  in  society,  they  would  find 
many  things  to  object  to. 

Accordingly,  opinions  in  political  economy  are  not  only 
maintained  by  vanity,  the  most  universal  of  human  in- 
firmities, but  by  self-interest,  unquestionably  not  less  so; 
and  which,  without  our  knowledge,  and  in  spite  of  our- 
selves, exercises  a  powerful  influence  over  our  mode  of 
thinking.  Hence  the  sharp  and  sour  intolerance  by  which 
truth  has  been  so  often  alarmed  and  obliged  to  retire ;  or 
which,  when  she  is  armed  with  courage,  encompasses  her 
with  disgrace,  and  sometimes  with  persecution.  Know- 
ledge is  at  present  so  very  generally  diffused,  that  a  phi- 
losopher may  assert,  without  the  risk  of  contradiction, 
that  the  laws  of  nature  are  the  same  in  a  world  and  in 
an  atom ;  but  a  statesman  who  should  venture  to  affirm, 
that  there  is  a  perfect  analogy  between  the  finances  of  a 
nation  and  those  of  an  individual,  and  that  the  same  prin- 
ciples of  economy  should  regulate  the  management  of  the 
affairs  of  both,  would  have  to  encounter  the  clamours  of 
various  classes  of  society,  and  to  refute  ten  or  a  dozen 
different  systems. 

Nor  is  this  all.  Writers  are  found  who  possess  the 
lamentable  facility  of  composing  articles  for  journals, 
pamphlets,  and  even  whole  volumes,  upon  subjects,  which, 
according  to  their  own  confession,  they  do  not  understand. 
And  what  is  the  consequence  ?  The  science  is  involved  in 
the  clouds  of  their  own  minds,  and  that  is  rendered  obscure 
which  was  becoming  clear.  Such  is  the  indifference  of  the 
public,  that  they  rather  prefer  trusting  to  assertions  than 
be  at  the  trouble  of  investigating  them.  Sometimes,  more- 
over, a  display  of  figures  and  calculations  imposes  upon 
them ;  as  if  numerical  calculations  alone  could  prove 
any  thing,  and  as  if  any  rule  could  be  laid  down,  from 
which  an  inference  could  be  drawn  without  the  aid  of 
sound  reasoning. 


H!  INTRODUCTION. 

These  are  among  the  causes  which  have  retarded  the 
progress  of  political  economy. 

Everything,  however,  announces  that  this  beautiful,  and 
above  all,  useful  science,  is  spreading  itself  with  increasing 
rapidity.  Since  it  has  been  perceived  that  it  does  not  rest 
upon  hypothesis,  but  is  founded  upon  observation  and 
experience,  its  importance  has  been  felt.  It  is  now  taught 
wherever  knowledge  is  cherished.  In  the  universities  of 
Germany,  of  Scotland,  of  Spain,  of  Italy,  and  of  the  north 
of  Europe,  professorships  of  political  economy  are  already 
established.  Hereafter  this  science  will  be  taught  in  them, 
with  all  the  advantages  of  a  regular  and  systematic  study. 
Whilst  the  university  of  Oxford  proceeds  in  her  old  and 
beaten  track,*  within  a  few  years  that  of  Cambridge  has 
established  a  chair  for  the  purpose  of  imparting  instruc- 
tion in  this  new  science.  Courses  of  lectures  are  delivered 
in  Geneva  and  various  other  places ;  and  the  merchants 
of  Barcelona  have,  at  their  own  expense,  founded  a  pro- 
fessorship on  political  economy.  It  is  now  considered  as 
forming  an  essential  part  of  the  education  of  princes  ;  and 
those  who  are  called  to  that  high  distinction  ought  to 
blush  at  being  ignorant  of  its  principles.  The  emperor 
of  Russia  has  desired  his  brothers,  the  grand  dukes  Nicho- 
last  and  Michael,  to  pursue  a  course  of  study  on  this  sub- 
ject under  the  direction  of  M.  Storch.  Finally,  the 
•government  of  France  has  done  itself  lasting  honour  by 
establishing  in  this  kingdom,  under  the  sanction  of  public 
authority,  the  first  professorship  of  political  economy. 

When  the  youths  who  are  now  students  shall  be  scat- 
tered through  all  the  various  classes  of  society,  and  ele- 
vated to  the  principal  posts  under  government,  public 
affairs  will  be  conducted  in  a  much  better  manner  than 
they  hitherto  have  been.  Princes  as  well  as  people,  be- 
coming more  enlightened  as  to  their  true  interests,  will 
perceive  that  these  interests  are  not  at  variance  with  each 

*  In  the  year  1826,  a  professorship  of  political  economy  was  founded  at  the  university 
of  Oxford,  and  a  highly  able  and  instructive  course  of  lectures  has  since  been  delivered 
before  that  university,  by  Nassau  William  Senior,  A.  M.,  the  first  professor  of  political 
economy.  We  have  rarely  read  a  more  masterly  and  entertaining  performance  thar 
I  he  professor's  discussion  of  the  mercantile  theory  of  wealth,  which  occupies  three  of 
n.s  iectnres.  AMERICAN  EDITOR. 

T  The  present  Emperor  Nicholas. 


INTRODUCTION.  lju 

other;  which  on  the  one  side  will  naturally  induce  less 
oppression,  and  on  the  other  beget  more  confidence. 

At  present,  authors  who  venture  to  write  upon  politics, 
history,  and  d  fortiori  upon  finance,  commerce,  and  the 
arts,  without  any  previous  knowledge  of  the*principles  of 
political  economy,  only  produce  works  of  temporary  suc- 
cess, that  do  not  succeed  in  fixing  public  attention. 

But  what  has  chiefly  contributed  to  the  advancement 
of  political  economy,  is  the  grave  posture  of  affairs  in  the 
civilized  world  during  the  last  thirty  years.  The  expenses 
of  governments  have  risen  to  a  scandalous  height ;  the 
appeals  which  they  have  been  obliged  to  make  to  their 
subjects,  in  order  to  relieve  their  exigencies,  have  dis- 
closed to  them  their  own  importance.  A  concurrence  of 
public  sentiment,  or  at  least  the  semblance  of  it,  has  been 
almost  everywhere  called  for,  if  not  brought  about.  The 
enormous  contributions  drawn  from  the  people,  under  pre- 
texts more  or  less  specious,  not  even  having  been  found 
sufficient,  recourse  has  been  had  to  loans ;  and  to  obtain 
credit,  it  became  necessary  for  governments  to  disclose 
their  wants  as  well  as  their  resources.  Accordingly,  the 
publicity  of  the  national  accounts,  and  the  necessity  of 
vindicating  to  the  world  the  acts  of  the  administration, 
have  in  the  science  of  politics  produced  a  moral  revolu- 
tion, whose  course  can  no  longer  be  impeded. 

The  disorders  and  calamities  incident  to  the  same  pe- 
riod, have  also  produced  some  important  experiments. 
The  abuse  of  paper  money,  commercial  and  other  restric- 
tions, have  made  us  feel  the  ultimate  effects  of  almost  all 
excesses.  And  the  sudden  overthrow  of  the  most  im- 
posing bulwarks  of  society,  the  gigantic  invasions,  the 
destruction  of  old  governments  and  the  creation  of  new, 
the  formation  of  rising  empires  in  another  hemisphere, 
the  colonies  that  have  become  independent,  the  general 
impulse  given  to  the  human  mind,  so  favourable  to  the 
development  of  all  its  faculties,  and  the  great  expectations 
and  the  great  mistakes,  have  all  undoubtedly  very  much 
enlarged  our  views;  at  first  operating  upon  men  of  calm 
observation  and  reflection,  and  subsequently  upon  al% 
mankind. 


liv  INTRODUCTION. 

It  is  to  the  facility  of  tracing  the  links  in  the  chain  of 
causes  and  effects  that  we  must  ascribe  the  great  improve- 
ment in  the  kindred  branches  of  moral  and  politica 
science ;  and  hence  it  is,  when  once  the  manner  in  which 
political  and^economical  facts  bear  upon  each  other  is  wel. 
understood,  that  we  are  enabled  to  decide  what  course  of 
conduct  will  be  most  advantageous  in  any  given  situation, 
Thus,  for  example,  to  get  rid  of  mendicity,  that  will  not  be 
done  which  only  tends  to  multiply  paupers ;  and,  in  order 
to  procure  abundance,  the  only  measures  calculated  to 
prevent  it  will  not  be  adopted.  The  certain  road  to  na- 
tional prosperity  and  happiness  being  known,  it  can  and 
will  be  chosen. 

For  a  long  time  it  was  thought  that  the  science  of  po- 
litical economy  could  only  possibly  be  useful  to  the  very 
limited  number  of  persons  engaged  in  the  administration 
of  public  affairs.  It  is  undoubtedly  of  importance  that 
men  in  public  life  should  be  more  enlightened  than  others ; 
in  private  life,  the  mistakes  of  individuals  can  never  ruin 
but  a  small  number  of  families,  whilst  those  of  princes 
and  ministers  spread  desolation  over  a  whole  country. 
But,  is  it  possible  for  princes  and  ministers  to  be  enlight- 
ened, when  private  individuals  are  not  so?  This  is  a 
question  that  merits  consideration.  It  is  in  the  middling 
classes  of  society,  equally  secure  from  the  intoxication 
of  power,  and  the  compulsory  labour  of  indigence,  in 
which  are  found  moderate  fortunes,  leisure  united  with 
habit's  of  industry,  the  free  intercourse  of  friendship,  a 
taste  for  literature,  and  the  ability  to  travel,  that  know- 
ledge originates,  and  is  disseminated  amongst  the  highest 
and  lowest  orders  of  the  people.  For  these  latter  classes, 
not  having  the  leisure  necessary  for  meditation,  only  adopt 
truths  when  presented  to  them  in  the  form  of  axioms,  re- 
quiring no  further  demonstration. 

And  although  a  monarch  and  his  principal  ministers 
should  be  well  acquainted  with  the  principles  upon  which 
national  prosperity  is  founded,  of  what  advantage  would 
this  knowledge  be  to  them,  if  throughout  all  the  different 
departments  of  administration,  their  measures  were  not 
supported  by  men  capable  of  comprehending  and  enforcing 
fhem  ?  The  prosperity  of  a  city  or  province  is  sometimes 


INTRODUCTION.  jv 

dependent  upon  the  official  acts  of  a  single  individual) 
and  the  head  of  a  subordinate  department  of  government, 
by  provoking  an  important  decision,  often  exercises  an 
influence  even  superior  to  that  of  the  legislator  himself. 
In  countries  blessed  with  a  representative  form  of  govern- 
ment, each  citizen  is  under  a  much  greater  obligation  to 
make  himself  acquainted  with  the  principles  of  political 
economy  ;  for  there  every  man  is  called  upon  to  deliberate 
upon  public  affairs. 

Finally,  in  supposing  that  every  person  in  any  way  con- 
nected with  government,  from  the  highest  to  the  lowest, 
could  be  well  acquainted  with  these  principles,  without 
the  nation  at  large  being  so,  which  is  wholly  improbable, 
what  resistance  would  not  the  execution  of  their  wisest 
plans  experience?  What  obstacles  would  they  not  en- 
counter in  the  prejudices  of  those  even  who  should  most 
favour  their  measures  ? 

A  nation,  in  order  to  enjoy  the  advantages  of  a  good 
system  of  political  economy,  must  not  only  possess  states- 
men capable  of  adopting  the  best  plans,  but  the  popula- 
tion must  be  in  a  situation  to  admit  of  their  application.* 

It  is  also  the  way  of  avoiding  doubts  and  perpetual 
changes  of  principles,  which  prevent  our  profiting  even 
from  whatever  may  be  good  in  a  bad  system.  A  steady 
and  consistent  policy  is  an  essential  element  of  national 
prosperity ;  thus  England  has  become  more  opulent  and 
powerful  than  would  seem  to  comport  with  her  territorial 
extent,  by  an  uniform  and  steadfast  adherence  to  a  system, 
even  in  many  respects  objectionable  to  her,  of  monopo- 
lizing the  maritime  commerce  of  other  nations.  But  to 
follow  for  any  length  of  time  the  same  route,  it  is  neces- 
sary to  be  able  to  choose  one  not  altogether  bad;  unfore- 
seen and  insurmountable  difficulties  would  otherwise  have 


*  I  here  suppose  the  higher  orders  of  society  to  be  actuated  by  a  sincere  desire  to  pro 
mote  the  public  good.  When  this  feeling;  however,  does  not  exist,  when  the  government 
is  faithless  and  corrupt,  it  is  of  still  greater  importance  that  the  people  should  become 
acquainted  with  the  real  state  of  things,  and  comprehend  their  true  interests.  Other 
wise,  they  suffer  without  knowing  to  what  causes  their  distresses  ought  to  be  attributed , 
or  indeed,  by  attributing  them  to  erroneous  causes,  the  views  of  the  public  are  distracted, 
their  efforts  disunited,  and  individuals,  thus  deprived  of  general  support,  fail  in  resolu 
tion,  and  despotism  is  strengthened ;  or  what  is  still  worse,  where  the  people  are  so 
badly  governed  as  to  become  desperate,  they  listen  to  pernicious  counsels,  and  exchange 
a  vicious  order  of  things  for  one  still  worse. 


In  INTRODUCTION. 

/ 

to  be  encountered,  which  would  oblige  us  to  change  our 
course,  without  even  the  reproach  of  versatility. 

It  is,  perhaps,  to  this  cause  we  must  attribute  the  evils 
which,  for  two  centuries,  have  tormented  France ;  a  pe- 
riod during  which  she  was  within  reach  of  that  state  of 

O 

high  prosperity  she  was  invited  to  by  the  fertility  of  her 
soil,  her  geographical  position,  and  the  genius  of  her  in- 
habitants. With  no  fixed  opinions  in  relation  to  the 
causes  of  public  prosperity,  the  nation,  like  a  ship  without 
chart  or  compass,  was  driven  about  by  the  caprice  of  the 
winds  and  the  folly  of  the  pilot,  alike  ignorant  of  the  place 
of  her  departure  or  destination.*  A  consistent  policy  in 
France  would  have  extended  its  influence  over  many  suc- 
cessive administrations;  and  the  vessel  of  the  state  would 
at  least  not  have  been  in  danger  of  being  wrecked,  or  ex- 
posed to  the  awkward  manoeuvres  by  which  she  has  so 
much  suffered. 

Versatility  is  attended  with  such  ruinous  consequences, 
that  it  is  impossible  to  pass  even  from  a  bad  to  a  good 
system  without  serious  inconvenience.  The  exclusive  and 
restrictive  system  is  without  doubt  vastly  injurious  to  the 
development  of  industry,  and  to  the  progress  of  national 
wealth  ;  nevertheless,  the  establishments  which  this  policy 
has  created  could  not  be  suddenly  suppressed,  without 
causing  great  distress/!"  A  more  favourable  state  of  things 
can  only  be  brought  about,  without  any  inconvenience,  by 
the  gradual  adoption  of  measures  introduced  with  infinite 
skill  ajid  care.  A  traveller  whose  limbs  have  been  frozen 
in  traversing  the  Arctic  regions,  can  only  be  preserved 
from  the  dangers  of  a  too  sudden  cure,  and  restored  to 
entire  health,  by  the  most  cautious  and  imperceptible 
remedies. 

The  soundest  principles  are  not  at  all  times  applicable. 
The  essential  object  is  to  know  them,  arid  then  such  as 
are  applicable  or  desirable  can  be  adopted.  There  can 

*  In  how  many  instances  have  not  great  pains  been  taken,  and  considerable  capital 
expended,  to  increase  the  evils  mankind  have  been  desirous  of  shunning !     How  nmny 
regulations  are  just  so  far  carried  into  execution  as  to  produce  all  the  injury  restrictions 
(•ossibly  can  effect,  and,  at  the  same  time,  just  as  far  violated  as  to  retain  all  the  incon- 
veniences arising-  from  their  infringement! 

*  This  arises  from  our  not  being  able,  without  serious  losses,  to  displace  the  capita. 
end  talents,  which,  owing  to  an  erroneous  system,  have  received  a  faulty  direction 


INTRODUCTION.  \v{\ 

be  no  doubt  that  a  new  community,  which  in  every  in- 
stance should  consult  them,  would  rapidly  reach  the  high- 
est pitch  of  opulence ;  but  every  nation  may,  nevertheless, 
in  many  respects  violate  them,  and  yet  attain  a  satisfac- 
tory state  of  prosperity.    The  powerful  action  of  the  vital 
principle  causes  the  human  body  to  grow  and  thrive  in 
spite  of  the  accidents  and  excesses  of  youth,  or  of  the 
wounds  which  have  been  inflicted  on  it.    Absolute  perfec- 
tion, beyond  which  all  is  evil,  and  produces  only  evil,  is 
nowhere  found ;   evil  is  everywhere   mixed  with   good. 
When  the  former  preponderates,  society  declines ;  when 
the  latter,  it  advances  with  more  or  less  rapidity  in  the 
road  of  prosperity.     Nothing,  therefore,  ought  to  discou- 
rage our  efforts  towards  the  acquisition  and  dissemination 
of  sound  principles.     The  least  step  taken  towards  the 
attainment  of  this  knowledge  is  immediately  productive 
of  some  good,  and  ultimately  will  yield  the  happiest  fruits. 
If,  for  the  interest  of  the  state,  it  is  important  that  indi- 
viduals should  know  what  are  the  true  principles  of  politi- 
cal economy,  who  will  venture  to  maintain  that  the  same 
knowledge  will  be  useless  to  them  in  the  management  of 
their   own    private   concerns  ?     That   money   is   readily 
earned   without  any  knowledge  of  the  nature  or  origin 
of  wealth,  I  admit.     For  that  purpose,  a  very  simple  cal- 
culation, within  the  reach  of  the  rudest  peasant,  is  all  that 
is  necessary  :  such  an  article  will,  including  every  expense, 
cost  me  so  much  ;  I  shall  sell  it  for  so  much,  and,  therefore, 
shall  gain  so  much.     Nevertheless,  accurate  ideas  respect- 
ing  the   nature   and   growth  of  wealth,  unquestionably 
afford  us  many  advantages  in  forming  a  sound  judgment 
of  enterprises  in  which  we  are  interested,  either  as  prin- 
cipals or  as  parties.   They  enable  us  to  foresee  what  these 
enterprises  will  require,  and  what  will  be  their  results;  to 
devise  the  means  of  their  success,  and  to  establish  our 
exclusive  claims  to  them  ;  to  select  the  most  secure  invest- 
ments, from  anticipating  the  effects  of  loans  and  other 
public   measures;    to    cultivate   the   earth  to  advantage, 
from  accurately  adjusting  actual  advances  with  probable 
returns;    to  become  acquainted  with  the  general  want? 
of  society,  and  thus  be  enabled  to  make  choice  of  a  pro 


Viii  INTRODUCTION. 

ession ;  and  to  discern  the  symptoms  of  national  pros- 
perity or  decline. 

The  opinion  that  the  study  of  the  science  of  political 
economy  is  calculated  to  be  useful  to  statesmen  only,  fal- 
lacious as  it  is,  has  been  attended  with  other  disadvan- 
tages. Almost  all  the  authors  on  this  subject,  until  the 
time  of  Dr.  Adam  Smith,  had  imagined  that  their  principal 
object  was  to  enlighten  the  public  authorities  ;  and  as  they 
were  far  from  agreeing  among  themselves,  inasmuch  as 
the  facts,  and  their  connexion  and  consequences,  were  but 
imperfectly  known  to  them,  and  entirely  overlooked  by 
the  multitude,  it  is  by  no  means  surprising  that  they  should 
have  been  regarded  as  visionary  dreamers  in  relation 
to  the  public  good.  Hence  the  contempt  which  men  in 
power  always  affect  towards  everything  like  first  prin- 
ciples. 

But  since  the  rigorous  method  of  philosophizing,  which 
in  every  other  branch  of  knowledge  leads  to  truth,  has 
been  applied  to  the  investigation  of  facts,  and  to  the  rea- 
sonings founded  on  them,  and  the  science  of  political 
economy  has  been  thus  confined  to  a  simple  exposition  of 
whatever  takes  place  in  relation  to  wealth,  it  no  longer 
attempts  to  offer  counsel  to  public  authorities.  Should 
they,  however,  be  desirous  of  ascertaining  the  good  or 
evil  consequences  likely  to  result  from  any  favourite  pro- 
ject, they  may  consult  this  science,  exactly  as  they  would 
consult  hydraulics  upon  the  construction  of  a  pump  or 
sluice.  All  that  can  be  required  from  political  economy 
is  to  furnish  governments  with  a  correct  representation 
of  the  nature  of  things,  and  the  general  laws  necessarily 
resulting  from  it.  Perhaps,  until  such  views  be  more  gene- 
rally diffused,  it  may  also  be  required,  to  point  out  to  them 
some  of  the  applications  of  its  principles.  Should  these 
be  despised  or  neglected,  the  governments  themselves,  as 
well  as  the  people,  will  be  the  sufferers.  The  husbandman 
who  sows  tares  can  never  expect  to  reap  wheat. 

Certainly,  if  political  economy  discloses  the  sources  of 
wealth,  points  out  the  means  of  rendering  it  more-  abun- 
dant, and  teaches  the  art  of  daily  obtaining  a  still  greater 
amount  without  ever  exhausting  it;  if  it  demonstrates, 
that  the  population  of  a -country  may,  at  the  same  time, 


INTRODUCTION.  ljx 

be  more  numerous  and  better  supplied  with  the  necessaries 
of  life ;  if  it  satisfactorily  proves  that  the  interest  of  the 
rich  and  poor,  and  of  different  nations,  are  not  opposed 
to  each  other,  and  that  all  rivalships  are  mere  folly;  and 
if  from  all  these  demonstrations  it  necessarily  results,  that 
a  multitude  of  evils  supposed  to  be  without  remedy,  may 
not  only  be  reckoned  curable,  but  even  easy  to  cure,  and  that 
we  need  not  suffer  from  them  any  longer  than  we  are  will- 
ing so  to  do ;  it  must  be  acknowledged  that  there  are 
few  studies  of  greater  importance,  or  more  deserving  the 
attention  of  an  elevated  and  benevolent  mind. 

Time  is  the  great  teacher,  and  nothing  can  supply  its 
operation.  It  alone  can  fully  demonstrate  the  advantages 
to  be  derived  from  a  knowledge  of  political  economy  in 
the  general  principles  of  legislation  and  government.  On 
the  one  hand,  the  custom  which  condemns  so  many  men 
of  sense,  at  the  same  time  that  they  admit  the  principles 
of  this  science,  to  speak  and  act  as  if  they  were  wholly 
ignorant  of  them,*  and  on  the  other,  the  resistance,  which 
individual  as  well  as  general  interests,  imperfectly  under- 

>  stood,  oppose  to  many  of  these  principles,  exhibit  nothing 

that  ought  either  to  surprise  or  alarm  individuals  animated 
with  a  desire  of  promoting  the  general  welfare.  The  phi- 
losophy of  Newton,  which,  during  a  period  of  fifty  years 
was  unanimously  rejected  in  France,  is  now  taught  in  all 
its  schools.  Ultimately  it  will  be  perceived,  that  there 
are  studies  of  still  greater  importance  than  this,  if  esti-  t 
mated  by  their  influence  on  the  happiness  and  prosperity 
of  mankind. 

Still  how  unenlightened  and  ignorant  are  the  very  na- 

*  "They  would  wish,  so  to  express  myself,  that  I  might  be  able  to  demonstrate  that 
my  proofs  are  conclusive,  and  that  they  are  not  wrong  in  submitting'  to  them.  The 
soundness  of  my  reasoning  has  produced  a  momentary  conviction ;  but  they  afterwards 
feel  the  habitual  influence  of  their  former  opinions  return  with  undiminished  authority, 
although  without  any  adequate  cause,  as  in  the  case  of  the  apparent  increase  in  the 
diameter  of  the  moon  at  the  horizon.  They  would  wish  to  be  freed  by  me  from  these 
troublesome  relapses,  of  whose  delusiveness  they  are  sensible,  but  which  nevertheless 
importune  them.  In  a'word,  they  are  desirous  that  I  should  be  enabled  to  effect  by 
reason  what  time  alone  can  accomplish ;  which  is  impossible.  Every  cause  has  an 
effect  peculiar  to  itself.  Reason  may  convince,  opinions  carry  us  along,  and  illusions 
perplex  us;  but  time  alone,  and  the  frequent  repetition  of  the  same  acts,  can  produce 
that  state  of  calmness  and  ease  which  we  call  habit.  Hence  it  is,  that  all  new  opinions 
are  such  a  length  of  time  in  spreading  themselves.  If  an  innovator  has  ever  had  im- 
mediate success,  it  is  only  from  having  discovered  and  promulgated  opinions  already 
floating  in  every  mind."  DESTUTT-TRACY,  Logique,  chap.  8. 


Ix  INTRODUCTION. 

tions  we  term  civilized  !  Survey  entire  provinces  of  proud 
Europe;  interrogate  a  hundred,  a  thousand,  or  even  ten 
thousand  individuals,  and  of  this  whole  number,  you  will 
hardly,  perhaps,  find  two  embued  with  the  slightest  tincture 
of  the  improved  science  of  which  the  present  age  so  much 
boasts.  This  general  ignorance  of  recondite  truths  is  by 
no  means  so  remarkable  as  an  utter  unacquaintance  with 
the  simplest  rudiments  of  knowledge  applicable  to  the 
situation  and  circumstances  of  every  one.  How  rare,  also, 
are  the  qualifications  necessary  for  one's  own  instruction, 
and  how  few  persons  are  solely  capable  of  observing  what 
daily  happens,  and  of  questioning  whatever  they  do  not 
understand ! 

The  highest  branches  of  knowledge  are  then  very  far 
from  having  yielded  to  society  all  the  advantages  to  be 
expected  from  them,  and  without  which  they  would  be 
mere  curious  speculations.  Perhaps  their  perfect  appli- 
cation is  reserved  for  the  nineteenth  century.  In  moral 
as  well  as  in  physical  science,  inquirers  of  superior  minds 
will  appear,  who,  after  having  extended  their  theoretical 
views,  will  disclose  methods  of  placing  important  truths 
within  the  reach  of  the  humblest  capacities.  In  the  ordi 
nary  occurrences  of  life,  instead  of  then  being  guided  by 
the  false  lights  of  a  transcendental  philosophy,  mankind 
will  be  governed  by  the  maxims  of  common  sense.  Opin- 
ions will  not  rest  on  gratuitous  assumptions,  but  be  the 
result  of  an  accurate  observation  of  the  nature  of  things. 
Thus,  habitually  and  naturally  ascending  to  the  source  of 
all  truth,  we  shall  not  suffer  ourselves  to  be  imposed  upon 
by  empty  sounds,  or  submit  to  the  guidance  of  erroneous 
impressions.  Corruption,  deprived  of  the  weapons  of  em- 
piricism, will  lose  her  principal  strength,  and  no  longer  be 
able  to  obtain  triumphs,  calamitous  to  honeef  men,  and 
disastrous  to  nations. 


BOOK  I. 

OF  THE  PRODUCTION  OF  WEALTH. 


CHAPTER  I. 

OF  WHAT  IS  TO  BE  UNDERSTOOD  BY  THE  TERM,  PRODUCTION. 

IP  we  take  the  pains  to  inquire  what  that  is,  which  mankind  in  a 
social  state  of  existence  denominate  wealth,  we  shall  find  the  term 
employed  to  designate  an  indefinite  quantity  of  objects  bearing 
inherent  value,  as  of  land,  of  metal,  of  coin,  of  grain,  of  stuffs,  of 
commodities  of  every  description.  When  they  further  extend  its 
signification  to  landed  securities,  bills,  notes  of  hand,  and  the  like,  it 
is  evidently  because  they  contain  obligations  to  deliver  things  pos- 
sessed of  inherent  value.  In  point  of  fact,  wealth  can  only  exist 
where  there  are  things  possessed  of  real  and  intrinsic  value. 

Wealth  is  proportionate  to  the  quantum  of  that  value ;  great,  when 
the  aggregate  of  component  value  is  great ;  small,  when  that  aggre- 
gate is  small. 

The  value  of  a  specific  article  is  always  vague  and  arbitrary,  so 
long  as  it  remains  unacknowledged.  Its  owner  is  not  a  jot  the  richer, 
by  setting  a  higher  ratio  upon  it  in  his  own  estimation.  But  the 
moment  that  other  persons  are  willing,  for  the  purpose  of  obtaining 
it,  to  give  in  exchange  a  certain  quantity  of  other  articles,  likewise 
bearing  value,  the  one  may  then  be  said  to  be  worth,  or  to  be  of 
equal  value  with,  the  other. 

The  quantity  of  money,  which  is  readily  parted  with  to  obtain  a 
thing,  is  called  its  price.  Current  price,  at  a  given  time  and  place, 
is  that  price  which  the  owner  is  sure  of  obtaining  for  a  thing,  if  he 
is  inclined  to  part  with  it.* 

The  knowledge  of  the  real  nature  of  wealth,  thus  defined,  of.  the 
difficulties  that  must  be  surmounted  in  its  attainment,  of  the  course 
and  order  of  its  distribution  amongst  the  members  of  society,  of  the 

*  The  numerous  and  difficult  points  arising  out  of  the  confusion  of  positive  anti 
relative  value  are  discussed  in  different  parts  of  this  work;  particularly  in  the 
leading  chapters  of  Book  II.  Not  to  perplex  the  attention  of  the  reader,  I  con- 
fine myself  here  to  so  much  as  is  absolutely  necessary  to  comprehend  the  phe 
nomenon  of  the  production  of  wealth. 
6 


62  ON  PRODUCTION.  BOOK  I. 

uses  to  which  it  may  be  applied,  and,  further,  of  the  consequences 
resulting  respectively  from  these  several  circumstances,  constitutes 
that  branch  of  science  now  entitled  Political  Economy. 

The  value  that  mankind  attach  to  objects  originates  in  the  use  it 
can  make  of  them.  Some  afford  sustenance ;  others  serve  for  cloth- 
ing; some  defend  them  from  the  inclemencies  of  the  season,  as 
houses ;  others  gratify  their  taste,  or,  at  all  events,  their  vanity,  both 
of  which  are  species  of  wants  :  of  this  class  are  all  mere  ornaments 
and  decorations.  It  is  universally  true,  that,  when  men  attribute 
value  to  any  thing,  it  is  in  consideration  of  its  useful  properties ;  what 
is  good  for  nothing  they  set  no  price  upon.*  To  this  inherent  fitness 
or  capability  of  certain  things  to  satisfy  the  various  wants  of  man- 
kind, I  shall  take  leave  to  affix  the  name  of  utility.  And  I  will  go 
on  to  say,  that,  to  create  objects  which  have  any  kind  of  utility,  is  to 
create  wealth ;  for  the  utility  of  things  is  the  ground- work  o*f  their 
value,  and  their  value  constitutes  wealth. 

Objects,  however,  cannot  be  created  by  human  means ;  nor  is  the 
mass  of  matter,  of  which  this  globe  consists,  capable  of  increase  or 
diminution.  All  that  man  can  do  is,  to  re-produce  existing  materials 
under  another  form,  which  may  give  them  an  utility  they  did  not 
before  possess,  or  merely  enlarge  one  they  may  have  before  present- 
ed. So  that,  in  fact,  there  is  a  creation,  not  of  matter,  but  of  utility ; 
and  this  I  call  production  of  wealth. 

In  this  sense,  then,  the  word  production  must  be  understood  in 
political  economy,  and  throughout  the  whole  course  of  the  present 
work.  Production  is  the  creation,  not  of  matter,  but  of  utility.  It 
is  not  to  be  estimated  by  the  length,  the  bulk,  or  the  weight  of  the 
product,  but  by  the  utility  it  presents. 

Although  price  is  the  measure  of  the  value  of  things,  and  their 
value  the  measure  of  their  utility,  it  would  be  absurd  to  draw  the 
inference,  that,  by  forcibly  raising  their  price,  their  utility  can  be 
augmented.  Exchangeable  value,  or  price,  is  an  index  of  the  recog- 
nised utility  of  a  thing,  so  long  only  as  human  dealings  are  exempt 
from  every  influence  but  that  of  the  identical  utility:  in  like  manner 
as  a  barometer  denotes  the  weight  of  the  atmosphere,  only  while  the 
mercury  is  submitted  to  the  exclusive  action  of  atmospheric  gravity. 

In  fact,  when  one  man  sells  any  product  to  another,  he  sells  him 
the  utility  vested  in  that  product ;  the  buyer  buys  it  only  for  the  sake 
of  its  utility,  of  the  use  he  can  make  of  it.  If,  by  any  cause  what- 
ever, the  buyer  is  obliged  to  pay  more  than  the  value  to  himself  of 

*  It  would  be  out  of  place  here  to  examine,  whether  or  no  the  value  mankind 
attach  to  a  thing  be  always  proportionate  to  its  actual  utility.  The  accuracy  of 
the  estimate  must  depend  upon  the  comparative  judgment,  intelligence,  habits, 
and  prejudices  of  those  who  make  it.  True  morality,  and  the  clear  perception 
of  their  real  interests,  lead  mankind  to  the  just  appreciation  of  benefits.  Politi- 
cal economy  takes  this  appreciation  as  it  finds  it — as  one  of  the  data  of  its  rea- 
8onings ;  leaving  to  the  moralist  and  the  practical  man,  the  several  duties  of 
enlightening  and  of  guiding  their  fellow-creatures,  as  well  in  this,  as  in  other 
particulars  of  human  conduct. 


CHAP.  I.  ON  PRODUCTION.  63 

that  utility,  he  pays  for  value  that  has  no  existence,  and  consequent 
ly  which  he  does  not  receive.* 

This  is  precisely  the  case,  when  authority  grants  to  a  particular 
class  of  merchants  the  exclusive  privilege  of  carrying  on  a  certain 
branch  of  trade,  the  India  trade  for  instance ;  the  price  of  Indian 
imports  is  thereby  raised,  without  any  accession  to  their  utility  or 
intrinsic  value.  This  excess  of  price  is  nothing  more  or  less  than  so 
much  money  transferred  from  the  pockets  of  the  consumers  into 
those  of  the  privileged  traders,  whereby  the  latter  are  enriched  ex- 
actly as  much  as  the  former  are  unnecessarily  impoverished.  In 
like  manner,  when  a  government  imposes  on  wine  a  tax,  which 
raises  to  15  cents  the  bottle  what  would  otherwise 'be  sold  for  10 
cents,  what  does  it  else,  but  transfer  5  cents  per  bottle  from  the  hands 
of  the  producers  or  the  consumers  of  wine  to  those  of  the  tax-gather- 
er ?f  The  particular  commodity  is  here  only  the  means  resorted  to 
for  getting  at  the  tax-payer  with  more  or  less  convenience ;  and  its 
current  value  is  composed  of  two  ingredients,  viz.  1.  Its  real  value 
originating  in  its  utility :  2.  The  value  of  the  tax  that  the  govern- 
ment thinks  fit  to  exact,  for  permitting  its  manufacture,  transport, 
or  consumption. 

Wherefore,  there  is  no  actual  production  of  wealth,  without  a 
creation  or  augmentation  of  utility.  Let  us  see  in  what  manner  this 
utility  is  to  be  produced. 


CHAPTER  II. 

OF  THE    DIFFERENT    KINDS   OF   INDUSTRY,   AND   THE   MODE  *IN   WHICH   THEY 
CONCUR  IN  PRODUCTION. 

SOME  items  of  human  consumption  are  the  spontaneous  gifts  of 
nature,  and  require  no  exertion  of  man  for  their  production ;  as  air, 
water,  and  light,  under  certain  circumstances.  These  are  destitute 
of  exchangeable  value ;  because  thp  want  of  them  is  never  felt,  others 
being  equally  provided  with  them  as  ourselves.  Being  neither  pro- 
curable by  production,  nor  destructible  by  consumption,  they  come 
not  within  the  province  of  political  economy. 

But  there  are  abundance  of  others  equally  indispensable  to  our 
existence  and  to  our  happiness,  which  man  would  never  enjoy  at  all, 
did  not  his  industry  awaken,  assist,  or  complete  the  operations  of 

*  This  position  will  hereafter  be  further  illustrated.  For  the  present  it  is 
enough  to  know,  that,  whatever  be  the  state  of  society,  current  prices  approxi- 
mate to  the  real  value  of  things,  in  proportion  to  the  liberty  of  production  ami 
mutual  dealing. 

t  It  will  be  shown  in  Book  HI.  of  this  work,  what  proportion  of  the  tax  is  paid 
by  the  producer,  and  what  by  the  consumer. 


04  ON  PRODUCTION.  BOOK  I. 

nature.    Such  are  most  of  the  articles  which  serve  for  his  food,  rai 
ment  and  lodging. 

When  that  industry  is  limited  to  the  bare  collection  of  natural 
products,  it  is  called  agricultural  industry,  or  simply  agriculture. 

When  it  is  employed  in  severing,  compounding,  or  fashioning  the 
products  of  nature,  so  as  to  fit  them  to  the  satisfaction  of  our  various 
wants,  it  is  called  manufacturing  industry* 

When  it  is  employed  in  placing  within  our  reach  objects  of  want 
which  would  otherwise  be  beyond  reach,  it  is  called  commercial 
industry,  or  simply  commerce. 

It  is  solely  by  means  of  industry  that  mankind  can  be  furnished, 
in  any  degree  of  abundance,  with  actual  necessaries,  and  with  that 
variety  of  other  objects,  the  use  of  which,  though  not  altogether  in- 
dispensable, yet  marks  the  distinction  between  a  civilized  communi- 
ty and  a  tribe  of  savages.  Nature,  left  entirely  to  itself,  would  pro- 
vide a  very  scanty  subsistence  to  a  small  number  of  human  beings. 
Fertile  but  desert  tracts  have  been  found  inadequate  to  the  bare 
nourishment  of  a  few  wretches,  cast  upon  them  by  the  chances  of 
shipwreck:  while  the  presence  of  industry  often  exhibits  the  spec- 
tacle of  a  dense  population  plentifully  supplied  upon  the  most  un- 
grateful soil. 

The  term  products  is  applied  to  things  that  industry  furnishes  to 
mankind. 

A  particular  product  is  rarely  the  fruit  of  one  branch  of  industry 
exclusively.  A  table  is  a  joint  product  of  agricultural  industry, 
which  has  felled  the  tree  whereof  it  is  made,  and  of  manufacturing 
industry,  which  has  given  it  form.  Europe  is  indebted  for  its  coffee 
to  the  agricultural  industry,  which  has  planted  and  cultivated  the 
bean  in  Arabia  or  elsewhere,  and  to  the  commercial  industry,  which 
hands  it  over  to  the  consumer. 

These  three' branches  of  industry,  which  may  at  pleasure  be  again 
infinitely  subdivided,  are  uniform  in  their  mode  of  contributing  to 
the  act  of  production.  They  all  either  confer  an  utility  on  a  sub- 
stance that  possessed  none  before,  or  increase  one  which  it  already 
possessed.  The  husbandman  who  sows  a  grain  of  wheat  that  yield's 
twenty-fold,  does  not  gain  this  product  from  nothing:  he  avails  him- 
self of  a  powerful  agent ;  that  is  to  say,  of  Nature,  and  merely  directs 
an  operation,  whereby  different  substances  previously  scattered 
throughout  the  elements  of  earth,  air,  and  water,  are  converted  into 
the  form  of  grains  o'f  wheat. 

Gall-nuts,  sulphate  of  iron,  and  gum-arabic,  are  substances  existing 
separately  in  nature.  The  joint  industry  of  the  merchant  and  manu- 
facturer brings  them  together,  and  from  their  compound  derives  the 
black  liquid,  applied  to  the  transmission  of  useful  science.  This 
joint  operation  of  the  merchant  and  manufacturer  is  analogous  to  that 

*  Since  matter  can  only  be  modified,  compounded,  or  separated,  by  moans 
either  mechanical  or  chemical,  all  branches  of  manufacturing  industry  may  be 
subdivided  into  the  mechanical  and  the  chemical  arts,  according  to  the  predomi- 
nance of  the  one  or  the  other  in  their  several  processes. 


CHAP.  II.  ON  PRODUCTION.  05 

of  the  husbandman,  who  chooses  his  object  and  effects  its  attainment 
by  precisely  the  same  kind  of  means  as  the  other  two. 

No  human  being  has  the  faculty  of  originally  creating  matter, 
which  is  more  than  nature  itself  can  do.  But  any  one  may  avail 
himself  of  the  agents  offered  him  by  nature,  to  invest  matter  with 
utility.  In  fact,  industry  is  nothing  more  or  less  than  the  human 
employment  of  natural  agents;  the  most  perfect  product  of  labour, 
the  one  that  derives  nearly  its  whole  value  from  its  workmanship,  is 
probably  the  result  of  the  action  of  steel,  a  natural  product  upon 
some  substance  or  other,  likewise  a  natural  product.* 

Through  ignorance  of  this  principle,  the  economists  of  the  18th 
century,  though  many  enlightened  writers  were  to  be  reckoned 
amongst  them,  were  betrayed  into  the  most  serious  errors.  They 
allowed  no  industry  to  be  productive,  but  that  which  procured  the 
raw  materials ;  as  the  industry  of  the  husbandman,  the  fisherman  and 
the  miner ;  not  adverting  to  the  distinction,  that  wealth  consists,  not 
in  matter,  but  in  the  value  of  matter;  because  matter  without  value 
is  no  item  of  wealth;  other\vise  water,  flint-stones,  and  dust  of  tho 
roads,  would  be  wealth.  Wherefore,  if  the  value  of  matter  consti- 
tutes wealth,  wealth  is  to  be  created  by  the  annexation  of  value. 
Practically,  the  man  who  has  in  his  warehouse  a  quintal  of  wool 
worked  up  into  fine  cloths,  is  richer  than  one  who  has  the  same 
quantity  of  wool  in  packs. 

To  this  position  the  economists  replied,  that  the  additional  value 
communicated  to  a  product  by  manufacture,  was  no  more  than  equi- 
valent to  the  value  consumed  by  the  manufacturer  during  the  process; 
/or,  said  they,  the  competition  of  manufactures  prevents  their  ever 
raising  the  price  beyond  the  bare  amount  of  their  own  expenditure 
and  consumption  ;  wherefore  their  labour  adds  nothing  to  the  total 
wealth  of  the  community,  because  their  wants  on  the  one  side  destroy 
as  much  as  their  industry  produces  on  the  other.f 

*  Alagrotti  in  his  Opuscula,  by  way  of  exemplifying  the  prodigious  addition 
of  the  value  given  to  an  object  by  industry,  adduces  the  spiral  springs  that 
check  the  balance-wheels  of  watches.  A  pound  weight  of  pig-iron  costs  the 
operative  manufacturer  about  five  cents.  This  is  worked  up  into  steel,  of  which 
is  made  the  little  spring  that  moves  the  balance-wheel  of  a  watch.  Each  of  these 
springs  weighs  but  the  tenth  part  of  a  grain ;  and  when  completed,  may  be  sold 
as  high  as  three  dollars,  so  that  out  of  a  pound  of  iron,  allowing  something  for 
the  loss  of  metal,  80,000  of  these  springs  may  be  made,  and  a  substance  of  five 
cents  value  be  wrought  into  a-  value  of  240,000  dollars. 

f  Mercier  de  la  Riviere,  in  his  work  entitled  "Ordre  Nat^rel  des  Societes  Poh- 
tirjires"  torn.  ii.  p.  255,  while  labouring  to  prove,  that  manufacturing  labour  is 
barren  and  unproductive,  makes  use  of  an  argument,  which  I  think  it  may  be  of 
some  service  to  refute,  because  it  has  been  often  repeated  in  different  shapes, 
and  some  of  them  specious  enough.  He  says,  "  that  if  the  unreal  products  of 
industry  are  considered  as  realities,  it  is  a  necessary  inference,  that  an  useless 
multiplication  of  workmanship  is  a  multiplication  of  wealth."  But  because 
human  labour  is  productive  of  value,  when  it  has  an  useful  result,  it  by  no  means 
follows,  that  it.  is  productive  of  value,  when  its  result  is  either  useless  or  injun 
oiis.  All  labour  is  not  productive :  but  such  only  as  adds  a  real  value  to  any 
substance  or  thinf.  And  the  futility  of  this  argument  of  the  economists  is  pin 
6*  I 


60  ON  PRODUCTION.  BOOK  I. 

But  it  should  have  been  previously  demonstrated  by  those  who 
made  use  of  this  argument,  that  the  value,  consumed  by  mechanics 
and  artizans,  must  of  necessity  barely  equal  the  value  produced  by 
them,  which  is  not  the  fact ;  for  it  is  unquestionable,  that  more  savings 
are  made,  and  more  capital  accumulated  from  the  profits  of  trade  and 
manufacture,  than  from  those  of  agriculture.(l). 

Besides,  even  admitting  that  the  profits  of  manufacturing  industry 
are  consumed  in  the  satisfaction  of  the  necessary  wants  of  the  manu- 
facturers and  their  families,  that  circumstance  does  not  prevent 
them  being  positive  acquisitions  of  wealth.  For  unless  they  were 
so,  they  could  not  satisfy  their  wants :  the  profits  of  the  land-owner 
and  agriculturist  are  allowed  to  be  items  of  positive  wealth ;  yet  they 
are  equally  consumed  in  the  maintenance  of  those  classes. 

Commercial,  in  like  manner  as  manufacturing  industry,  concurs 
in  production,  by  augmenting  the  value  of  a  product  by  its  transport 
from  one  place  to  another.  A  quintal  of  Brazil  cotton  has  acquired 
greater  utility,  and  therefore  larger  value,  by  the  time  it  reaches  a 
warehouse  in  Europe,  than  it  possessed  in  one  at  Pernambuco.  The 
transport  is  a  modification  that  the  trader  gives  to  the  commodity, 
whereby  he  adapts  to  our  use  what  was  not  before  available ;  which 
modification  is  equally  useful,  complex  and  uncertain  in  the  result, 
as  any  it  derives  from  the  other  two  branches  of  industry.  He 
avails  himself  of  the  natural  properties  of  the  timber  and  the  metals 
used  in  the  construction  of  his  ships,  of  the  hemp  whereof  his  rigging 
is  composed,  of  the  wind  that  fills  his  sails,  of  all  the  natural  agents 
brought  to  concur  in  his  purpose,  with  precisely  the  same  view  and 
the  same  result,  and  in  the  same  manner  too,  as  the  agriculturist 
avails  himself  of  the  earth,  the  rain,  and  the  atmosphere.* 

beyond  all  question  by  the  circumstance,  that  it  may  be  equally  employed 
against  their  own  system  and  that  of  their  opponents.  They  may  be  told,  "  You 
admit  the  industry  of  the  cultivator  to  be  productive ;  therefore  he  has  only  to 
plough  and  sow  his  fields  ten  times  a  year  to  increase  his  productiveness  ten- 
fold," which  is  absurd. 

*  Genovesi,  who  lectured  on  political  economy  at  Naples,  defines  commerce 
to  be  "the  exchange  of  superfluities  for  necessaries."  He  gives  as  his  reason, 
that  in  every  transaction  of  exchange,  the  article  received  appears  to  each  of  the 
contracting  parties  more  necessary  than  that  given.  This  is  a  far-fetched  notion, 
which  I  think  myself  called  on  to  notice,  because  it  has  obtained  considerable 
currency.  It  would  be  difficult  to  prove,  that  a  poor  labourer,  who  goes  to  the 

(1)  [Our  author,  in,  here  asserting,  "  that  more  savings  are  made,  and  more 
capital  accumulated  from  the  profits  of  trade  and  manufacture,  than  from  those 
of  agriculture,"  has  fallen  into  an  error,  which  it  is  proper  to  notice.  In  the 
absence  of  prohibitions  and  restraints,  the  profits  of  agriculture,  manufactures 
and  commerce,  will  all  be  on  an  equality,  or  always  nearly  approaching  towards 
it;  for  any  material  difference  will  cause  a  diversion  of  capital  and  industry  to 
the  more  productive  channel,  and  by  that  means  restore  the  equilibrium.  In 
overthrowing  the  hypothesis  of  the  economists,  the  author  has  inadvertently,  for 
a  moment,  lost  sight  of  his  own  general  principles,  which  so  clearly  establish 
the  equality  of  profits  in  all  the  different  branches  of  industry.] 

AMERICAN  EDITOR. 


CUAP.  H.  ON  PRODUCTION.  67 

Thus,  when  Raynal  says  of  commerce,  as  contrasted  with  agricul 
ture  and  the  arts,  that  "  it  produces  nothing  of  itself,"  he  shows  him- 
self  to  have  had  no  just  conception  of  the  phenomenon  of  production. 
In  this  instance  Raynal  has  fallen  into  the  same  error  with  regard  to 
commerce,  as  the  economists  made  respecting  both  commerce  and 
manufacture.  They  pronounced  agriculture  to  be  the  sole  channel 
of  production ;  Raynal  refers  production  to  the  two  channels  of  agri- 
culture and  manufacture :  his  position  is  nearer  the  truth  than  the 
other,  but  still  is  erroneous. 

Condillac  also  is  confused  in  his  endeavour  to  explain  the  mode  in 
which  commerce  produces.  He  pretends  that,  because  all  commo- 
dities cost  to  the  seller  less  than  the  buyer,  they  derive  an  increase 
of  value  from  the  mere  act  of  transfer  from  one  hand  to  another. 
But  this  is  not  so ;  for,  since  a  sale  is  nothing  else  but  an  act  of  barter, 
in  which  one  kind  of  goods,  silver  for  example,  is  received  in  lieu 
of  another  kind  of  goods,  the  loss  which  either  of  the  parties  dealing 
should  sustain  on  one  article  would  be  equivalent  to  the  profit  he 
would  make  on  the  other,  and  there  would  be  to  the  community  no 
production  of  value  whatsoever.*  When  Spanish  wine  is  bought  at 
raris,  equal  value  is  really  given  for  equal  value:  the  silver  paid, 
and  the  wine  received,  are  worth  one  the  other;  but  the  wine  had  not 
the  same  value  before  its  export  from  Alicant :  its.  value  has  really 
increased  in  the  hands  of  the  trader,  by  the  circumstance  of  trans- 
port, and  not  by  the  circumstance,  or  at  the  moment,  of  exchange. 

alehouse  on  a  Sunday,  exchanges  there  his  superfluity  for  a  necessary.  In  all 
fair  traffic,  there  occurs  a  mutual  exchange  of  two  things,  which  are  worth  one 
the  other,  at  the  time  and  place  of  exchange.  Commercial  production,  that  is 
to  say,  the  value  added  by  commerce  to  the  things  exchanged,  is  not  operated  by 
the  act  of  exchange,  but  by  the  commercial  operations  that  precede  it. 

The  Count  de  Verri  is  the  only -writer  within  my  knowledge,  who  has  explain- 
ed the  true  principle  and  ground- work  of  commerce.  In  the  year  1771,  he 
thus  expresses  himself:  "Commerce  is  in  fact  nothing  more  than  the  transport, 
of  goods  from  one  place  to  another."  (Meditazioni  sulla  economic,  politico,  §  4.) 
The  celebrated  Adam  Smith  himself  appears  to  have  had  no  very  clear  idea  of 
commercial  production.  He  merely  discards  the  opinion,  that  there  is  any  pro- 
duction of  value  in  the  act  of  exchange. 

*  This  circumstance  has  escaped  the  attention  of  Sismondi,  or  he  would  not 
have  said,  "  The  trader  places  himself  between  jhe  producer  and  the  consumer, 
to  benefit  them  both  at  once,  making  his  charge  for  that  benefit  upon  -both." 
(Nouveaux  Principes  d' 'Economic  Pol.  Liv.  ii.  ch.  8).  He  would  make  it 
appear  as  if  the  trader  subsisted  wholly  upon  the  value  produced  by  the  agricul- 
turist and  the  manufacturer;  whereas  he  is  maintained  by  the  real  value  he  him- 
self communicates  to  commodities  by  giving  them  an  additional  modification,  an 
useful  property.  It  is  this  very  notion  that  stirs  up  the  popular  indignation 
against  the  dealers  in  grain. 

I,.  .S'ffj/,  of  Nantes,  has  fallen  into  the  same  mistake  (Principales  Causes  de 
la  Richesse,  &c.  p.  110).  By  way  of  demonstrating  the  value  conferred  by 
commerce  to  be  unreal,  he  alleges  it  to  be  absorbed  by  the  charges  of  transport. 
By  this  incidental  process  of  reasoning,  the  economist  concluded  manufacture  to 
be  unproductive ;  not  perceiving,  that  in  these  very  charges  consists  the  revenue 
of  the  commercial  and  manufacturing  producers ;  and  that  it  is  in  this  way  that 
the  values  raised  by  production  at  large  are  distributed  amongst  the  several  pro 
ducers. 


38  ON  PRODUCTION.  BOOK  I. 

The  seller  does  not  play  the  rogue,  nor  the  buyer  the  fool ;  and  Con- 
dillac  has  no  grounds  for  his  position,  that  "  if  men  always  exchang- 
ed equal  value  for  equal  value,  there  would  be  no  profit  to  be  made 
by  the  traders."* 

In  some  particular  cases  the  two  other  branches  of  industry  pro- 
duce in  a  manner  analogous  to  commerce,  viz.  by  giving  a  value  to 
things  to  which  they  actually  communicate  no  new  quality,  but  that 
of  approximation  to  the  consumer.  Of  this  description  is  the  indus- 
try of  miners.  The  coal  or  metal  may  exist  in  the  earth,  in  a  perfect 
state,  but  unpossessed  of  value.  The  miner  extracts  them  thence, 
and  this  operation  gives  them  a  value,  by  fitting  them  for  the  use  of 
mankind.  So  also  of  the  herring  fishery.  Whether  in  or  out  of 
the  sea,  the  fish  is  the  same ;  but  under  the  latter  circumstances,  it 
has  acquired  an  utility,  a  value,  it  did  not  before  possess.f 

Examples  might  be  infinitely  multiplied,  and  would  all  bear  as 
close  an  affinity,  as  those  natural  objects,  which  the  naturalist  classi- 
fies only  to  facilitate  their  description. 

This  fundamental  error  of  the  economists,  in  which  I  have  shown 
that  their  adversaries  in  some  measure  participated,  led  them  to  the 
strangest  conclusions.  According  to  their  theory,  the  traders  and 
manufacturers,  being  unable  to^add  an  iota  to  the  general  stock  of 
wealth,  live  entirely  at  the  expense  of  the  sole  producers,  that  is  to 
say,  the  proprietors  and  cultivators  of  the  land.  Whatever  new 
value  they  may  communicate  to  things,  they  at  the  same  time  con- 
sume an  equivalent  product,  furnished  by  the  real  producers:  manu- 
facturing and  commercial  nations,  therefore,  subsist  wholly  upon  the 
wages  they  receive  from  their  agricultural  customers ;  in  proof  of 
which  position,  they  alleged  that  Colbert  ruined  France  by  his  pro- 
tection of  manufactures,  &c.J 

The  truth  is,  that,  in  whatever  class  of  industry  a  person  is 
engaged,  he  subsists  upon  the  profit  he  derives  from  the  additional 

*  See  his  work  entitled,  "  Le  Commerce  et  le  (fouvernment  consideres  rela- 
tivement  Tun  a  fautre."  Ire.  partie,  ch.  6. 

f  We  may  consider  as  agents  of  the  same  class  of  industry,  the  cultivator  of 
the  land,  the  breeder  of  cattle,  the  woodcutter,  the  fisherman  that  takes  fish  he 
has  been  at  no  pains  in  breeding,  and  the  miner  who,  from  the  bowels  of  the 
earth,  extracts  metal,  stone,  or.combiistibles,  that  nature  has  placed  there  in  a 
perfect  state;  and,  to  avoid  multiplicity  of  denominations,  the  whole  of  these 
occupations  may  be  called  by  the  name  of  agricultural  industry,  because  the 
superficial  cultivation  of  the  earth,  is  the  chief  and  most  important  of  all.  Terms 
are  of  little  consequence,  when  the  ideas  are  clear  and  definite.  The  wine- 
grower, who  himself  expresses  the  juice  of  his  grapes,  performs  a  mechanical 
operation,  that  partakes  more  of  manufacture  than  agriculture.  But  it  matters 
little  whether  he  be  classed  as  a  manufacturer  or  agriculturist;  provided  that  it 
be  clearly  comprehended  in  what  manner  his  industry  adds  to  the  value  of  the 
product.  If  we  wish  to  give  separate  consideration  to  every  possible  manner  of 
giving  value  to  things,  industry  may  be  infinitely  subdivided.  If  it  be  the  object 
to  generalize  to  the  utmost,  it  may  be  treated  as  one  and  the  same;  for  every 
branch  of  it  will  resolve  itself  into  this:  the  employment  of  natural  substances 
and  agents  in  the  adaptation  of  products  to  human  consumption. 

•  See  tne  numberless  writings  of  that  sect. 


CHAP.  IL  ON  PRODUCTION.  69 

value,  or, portion  of  value,  no  matter  in  what  ratio,  which  his  agoncy 
attaches  to  the  product  he  is  at  work  upon.  The  total  value  of  pro- 
ducts serves  in  this  way  to  pay  the  profits  of  those  occupied  in  pro- 
duction. The  wants  of  mankind  are  supplied  and  satisfied  out  ot 
the  gross  values  produced  and  created,  and  not  out  of  the  net  values 
only. 

A  nation,  or  a  class  of  a  nation,  engaged  in  manufacturing  or  com- 
mercial industry,  is  not  a  whit  more  or  less  in  the  pay  of  another, 
than  one  employed  in  agriculture.  The  value  created  by  one  branch 
is  of  the  same  nature  as  that  created'  by  others.  Two  equal 
values  are  worth  one  the  other,  although  perhaps  the  fruit  of  differ- 
ent branches  of  industry:  and  when  Poland  barters  its  staple  product, 
wheat,  for  the  staple  commodity  of  Holland,  East  and  West  India 
produce,  Holland  is  no  more  in  the  pay  or  service  of  Poland,  than 
Poland  is  of  Holland. 

Nay,  Poland  herself,  which  exports  at  the  rate  of  ten  millions  of 
wheat  annually,  and  therefore,  according  to  the  economists,  takes  the 
sure  road  to  national  wealth,  is,  notwithstanding,  poor  and  depopu- 
lated :  and  why  ? — Because  she  confines  her  industry  to  agriculture, 
though  she  might  be  at  the  same  time  a  commercial  and  manufactur- 
ing state.  Instead  of  keeping  Holland  in  her  pay,  she  may  with 
more  propriety  be  said  to  receive  wages  from  the  latter,  for  the 
raising  of  ten  millions  of  wheat,  per  annum.  Nor  is  she  a  jot  less 
dependent  than  the  nations  that  buy  wheat  of  her:  for  she  has  just 
as  much  desire  to  sell  to  them,  as  they  have  to  buy  of  her.* 

Moreover,  it  is  not  true  that  Colbert  ruined  France.  On  the  con- 
trary, the  fact  is  that  France,  under  Colbert's  administration,  emerged 
from  the  distress  that  two  regencies  and  a  weak  reign  had  involved 
her  in.  She  was,  indeed,  afterwards  ruined  again ;  buj  for  this  second 
calamity,  she  may  thank  the  pageantry  and  the  wars  of  Louis  XIV. 
Nay,  the  very  prodigality  of  that  prince  is  an  undeniable  evidence 
of  the  vast  resources  that  Colbert  had  placed  at  his  disposal.  It  must, 
however,  be  admitted  that  those  resources  would  have  been  still 
more  ample,  if  he  had  but  given  the  same  protection  to  agriculture, 
as  to  the  other  branches  of  industry. 

Thus  it  is  evident,  that  the  means  of  enlarging  and  multiplying 
wealth  within  the  reach  of  every  community  are  much  less  confined 
than  the  economists  imagined.  A  nation,  by  their  account,  was  un- 
able to  produce  annually  any  values  beyond  the  net  annual  produce 
of  its  lands ;  to  which  fund  alone  recourse  could  be  had  for  the  sup- 
port not  only  of  the  proprietary  and  the  idler,  but  likewise  of  the 
merchant,  the  manufacturer,  and  the  mechanic,  as  well  as  for  the  total 
consumption  of  the  government.  Whereas  we  have  just  seen  that 
the  annual  produce  of  a  nation  is  composed,  not  of  the  mere  net  pro- 

*  We  shall  find  in  the  sequel,  that,  if  any  one  nation  can  be  said  to  be  in  the 
service  of  another,  it  is  that  which  is  the  most  dependent;  and  that  the  most 
dependent  nations  are,  not  those  which  have  a  scarcity  of  land,  but  those  which 
bave  a  scarcity  of  capital. 


70  ON  PRODUCTION.  BOOK  1 

duce  of  its  agriculture,  but  of  the  gross  produce  of  its  agriculture, 
commerce,  and  manufacture  united.  For,  in  fact,  is  not  the  sum 
total,  that  is  to  say,  the  aggregate  of  the  gross  product  raised  by  the 
nation,  disposable  for  its  consumption  ?  Is  value  produced  less  an 
item  of  wealth,  because  it  must  needs  be  consumed  ?  And  does  not 
value  itself  originate  in  this  very  applicability  to  consumption. 

The  English  writer,  Stewart,who  may  be  looked  upon  as  the  leading 
advocate  of  the  exclusive  system,  the  system  founded  on  the  maxim, 
that  the  wealth  of  one  set  of  men  is  derived  from  the  impoverish- 
ment of  another,  is  himself  no  less  mistaken  in  asserting,  that,  "  when 
once  a  atop  is  put  to  external  commerce,  the  stock  of  internal  wealth 
cannot  be  augmented."*  Wealth,  it  seems,  can  come  only  from 
abroad ;  but  abroad,  where  does  it  come  from  ?  from  abroad  also.  So 
that  in  tracing  it  from  abroad  to  abroad,  we  must  necessarily,  in  the 
end,  exhaust  every  source,  till  at  last  we  are  compelled  to  look  for  it 
beyond  the  limits  of  Our  own  planet,  which  is  absurd. 

Forbonnais,f  too,  builds  his  prohibitory  system  on  this  glaring 
fallacy;  and  to  speak  freely,  on  this  fallacy  are  founded  the  exclu- 
sive systems  of  all  the  short-sighted  merchants,  and  all  the  govern- 
ments of  Europe  and  of  the  world.  They  all  take  it  for  granted, 
that  what  one  individual  gains  must  needs  be  lost  to  another;  that 
what  is  gained  by  one  country  is  inevitably  lost  to  another:  as  it 
the  possessions  of  abundance  of  individuals  and  of  communities  could 
not  be  multiplied,  without  the  robbery  of  somebody  or  other.  It 
one  man  or  set  of  men,  could  only  be  enriched  at  others'  expense, 
how  could  the  whole  number  of  individuals,  of  whom  a  state  is  com- 
posed, be  richer  at  one  period  than  at  another,  as  they  now  confess- 
edly are  in  France,  England,  Holland,  and  Germany,  compared  with 
what  they  wer|  formerly?  How  is  it,  that  nations  are  in  our  days 
more  opulent,  and  their  wants  better  supplied  in  every  respect,  than 
they  were  in  the  seventeenth  century?  Whence  can  they  have 
derived  that  portion  of  their  present  wealth,  which  then  had  no 
existence?  Is  it  from  the  mines  of  the  new  continent?  They  had 
already  advanced  in  wealth  before  the  discovery  of  America.  Be 
sides,  what  is  that  which  these  mines  have  furnished?  Metallic 
wealth  or  value.  But  all  the  other  values  which  those  nations  now 
possess,  beyond  what  they  did  in  the  middle  ages,  whence  are  they 
derived?  Is  it  not  clear,  that  these  can  be  no  other  than  created 
values? 

We  must  conclude,  then,  that  wealth,  wrhich  consists  in  the  value 
that  human  industry,  in  aid  and  furtherance  of  natural  agents,  com- 
municates to  things,  is  susceptible  of  creation  and  destruction,  of 
increase  and  diminution,  within  the  limits  of  each  nation  and  inde- 
pendently of  external  agency,  according  to  the  method  it  adopts  tc 
bring  about  those  effects.  An  important  truth,  which  ought  to  teach 

*  Essay  on  Political  Economy,  b.  ii.  c.  26. 
f  Siemens  de  Commerce, 


CHAP.  HL  ON  PRODUCTION.  71 

mankind,  that  the  objects  of  rational  desire  are  within  their  reach, 
provided  they  have  the  will  and  intelligence  to  employ  the  true 
means  of  obtaining  them.  Those  means  it  is  the  purpose  of  this 
work  to  investigate  and  unfold. 


CHAPTER  IIL 

OF  THE  NATURE  OF  CAPITAL,  AND  THE  MODE   IN  WHICH  IT  CONCURS  IN 
THE  BUSINESS  OF  PRODUCTION. 

As  we  advance  in  the  investigation  of  the  processes  of  industry, 
we  cannot  fail  to  perceive,  that  mere  unassisted  industry  is  insuffi- 
cient to  invest  things  with  value.  The  human  agent  of  industry 
must,  besides,  be  provided  with  pre-existing  products ;  without  w  hich 
his  agency,  however  skilful  and  intelligent,  would  never  be  put  in 
motion.  These  pre-existing  requisites  are, 

1.  The  tools  and  implements  of  the  several  arts.     The  husband- 
man could  do  nothing  without  his  spade  and  mattock,  the  weaver 
without  his  loom,  or  the  mariner  without  his  ship. 

2.  The  products  necessary  for  the  subsistence  of  the  industrious 
agent,  as  long  as  he  is  occupied  in  completing  his  share  of  the  work 
or  production.     This  outlay  of  his  subsistence  is,  indeed,  in  the  long 
run,  replaced  by  the  product  he  is  occupied  upon,  or  the  price  he 
will  receive  for  it;  but  he  is  obliged  continually  to  make  the  advance. 

3.  The  raw  materials,  which  are  to  be  converted  into  finished 
products  by  the  means  of  his  industry.     These  materials,  it  is  true, 
are  often  the  gratuitous  offerings  of  nature,  but  they  are  much  more 
generally  the  products  of  antecedent  industry,  as  in  the  case  of  seed- 
corn  supplied  by  agriculture,  metals,  the  fruit  of  the  labour  of  the 
miner  and  smelter,  drugs  brought  by  the  merchant  perhaps  from  the 
extremities  of  the  globe.     The  value  of  all  these  must  be  found  in 
advance  by  the  industrious  agent  that  works  them  up. 

The  value  of  all  these  items  constitutes  what  is  denominated  pro- 
ductive capital. 

Under  this  head  of  productive  capital  must  likewise  be  classed  the 
value  of  all  erections  and  improvements  upon  real  or  landed  property, 
whicn  increase  its  annual  produce,  as  well  as  that  of 'the  farming  live 
and  dead  stock,  that  operates  as  machinery  in  aid  of  human  industry. 

Another  item  of  productive  capital,  is  money,  whenever  it  is 
employed  to  facilitate  the  interchange  of  products,  without  which 
production  could  never  make  any  progress.  Money  distributed 
through  the  whole  mechanism  of  human  industry,  like  the  oil  that 
greases  the  wheels  of  complex  machinery,  gives  the  requisite  ease 
and  facility  to  its  movements.  But  gold  and  silver  are  not  produc 
live  unless  employed  by  industry :  they  are  like  the  oil  in  a  machine 


72  ON  PRODUCTION.  BOOK  L 

remaining  in  a  state  of  inaction.  And  so  also  of  all  other  tools  and 
implements  of  human  industry. 

Jt  would  evidently  be  a  great  mistake  to  suppose  that  the  capital 
of  a  community  consists  solely  of  its  money.  The  merchant,  the 
manufacturer,  the  cultivator,  commonly  have  the  least  considerable 
portion  of  the  value  composing  their  capital  invested  in  the  form  of 
money;  nay,  the  more  active  their  concern  is,  the  smaller  is  their 
relative  proportion  of  their  capital  so  vested  to  the  residue.  The 
funds  of  the  merchant  are  placed  out  in  goods  on  their  transit  by 
land  or  water,  or  warehoused  in  different  directions:  the  capital  of 
the  manufacturer  chiefly  consists  of  the  raw  material  in  different 
stages  of  progress,  of  tools,  implements,  and  necessaries  for  his  work- 
men :  while  that  of  the  cultivator  is  vested  in  farming  buildings,  live 
stock,  fences  and  enclosures.  They  all  studiously  avoid  burthening 
themselves  with  more  money  than  is  sufficient  for  current  use. 

What  is  true  of  one,  two,  three,  or  four  individuals,  is  true  of 
soci'ety  in  the  aggregate.  The  capital  of  a  nation  is  made  up  of  the 
sum  total  of  private  capitals;  and,  in  proportion  as  a  nation  is  pros- 
perous and  industrious,  in  the  same  proportion  is  that  part  of  its 
capital,  vested  in  the  shape  of  money,  trifling  compared  to  the  amount 
of  the  gross  national  capital.  Neckar  estimates  the  circulating 
medium  in  France,  in  the  year  1784,  at  about  440  millions  of  dol- 
lars, and  there  are  reasons  for  believing  his  estimate  exaggerated-; 
but  this  is  not  the  time  to  state  them.  However,  if  account  be  taken 
of  all  the  works,  enclosures,  live  stock,  utensils,  machines,  ships, 
commodities,  and  provisions  of  all  sorts  belonging  to  the  French 
people  or  their  government  in  any  part  of  the  world ;  and,  if  to 
these  be  added  the  furniture,  decorations,  jewellery,  plate,  and  other 
items  of  luxury  or  convenience,  whereof  they  were  possessed,  at  the 
same  period,  it  will  be  found  that  440  millions  of  Circulating  medium 
was  a  mere  trifle  compared  to  the  aggregate  of  these  united  values.* 

Beeke  estimates  the  total  capital  of  Great  Britain  at  2300  millions 
sterling,f  (equal  to  more  than  11,000  millions  of  dollars.)  The  total 
amount  of  her  circulating  specie,  before  the  establishment  of  her 
present  paper  money,  was  never  reckoned  by  the  highest  estimates 
at  more  than  47  millions  sterling  ;J  that  is  to  say,  about  l-50th  of 
her  capital.  Smith  reckoned  it  at  no  more  than  18  millions,  which 
could  not  be  the  l-127th  part.(l). 

*Artnur  Young,  in  his  "  Journey  in  France"  in  spite  of  the  unfavourable 
view  lie  gives  of  French  Agriculture,  estimates  the  total  capital  employed  in 
that  kingdom,  in  that  branch  of  industry  alone,  at  more  than  2200  millions  of 
dollars;  and  states  his  belief,  that  the  capital  of  Great  Britain,  similarly  employ- 
ed, is  in  the  proportion  of  two  to  one. 

f-  Observations  on  the  produce  of  the  income-lax. 

|  Pitt,  who  is  supposed  to  have  overrated  the  quantity  of  specie,  states  the 
pold  at  forty-four-millions;  and  Price  estimates  the  silver  at  three  millions, 
making-  a  total  of  forty-seven  millions. 

(1)  [The  following  summary  recapitulation  of  the  value  of  property  in  Great 
Britain  and  Ireland,  in  the  year  1833,  is  extracted  from  "Table  XVI.  GENERAL 


CHAP.  III. 


ON  PRODUCTION. 


Capital  in  the  hands  of  a  national  government  forms  a  part  of  the 
gross  national  capital. 

We  shall  see,  by-and-by,  how  capital,  which  is  subject  to  a  conti- 
nual wear  and  consumption  in  the  process  of  production,  is  continu- 
ally replaced  by  the  very  operation  of  production ;  or  rather,  how  its 
value,  when  destroyed  under  one  form,  re-appears  under  another. 
At  present  it  is  enough  to  have  a  distinct  conception,  that,  without  it, 
industry  could  produce  nothing.  Capital  must  work,  as  it  were,  in 
concert  with  industry ;  and  this  concurrence  is  what  I  call  the  pro- 
ductive agency  of  capital. 


ESTIMATE  of  the  PUBLIC  and  PRIVATE  Property  of  ENGLAND  and  WALES,  SCOT- 
LAND and  IRELAND,  (1833),"  from  "  PEBRER  on  the  TAXATION,  DEBT,  CAPITAL, 
RESOURCES,  &c.  of  the  whole  BRITISH  EMPIRE,"  a  work  of  the  highest  authority, 
published  in  London,  April,  1833. 

SUMMARY  RECAPITULATION. 
AGGREGATE    VALUE    OF    PROPERTY    IN    GREAT   BRITAIN   AND    IRELAND. 


Productive  Private  Property, 
Unproductive       do. 


Public  Property, 


Equal  to  dollars, 


£2,995,000,000 
580,700,000 

3,575,700,000 
103,800,000 


Total,    £3,679,500,000 


ENGLAND  AND  WALES: 

Productive  Private  Property,  -    -    -    -      £2,054,600,000 

Unproductive        do.  -    -    -    -  374,300,000 

SCOTLAND  : 

Productive  Private  Property,  -    -    -    -  318,300,000 

Unproductive        do.  ....  51,100,000 

IRELAND : 

Productive  Private  Property,  -    -    -    -  622,100,000 

Unproductive        do.  ....  116,400,000 


Do. 


do.  in  Great  Britain  and  Ireland, 


17,661,600,000 


2,428,900,000 


?69,400,000 


738,500,000 
38,900,000 


Public  Property  in  England  and  Wales,  42,000,000 

Do.            in  Scotland,    -    -    -    -  3,900,000 

Do.            in  Ireland,      ...    -  11,900,000 
Do.             in  common  to  Great  Britain  } 

and  Ireland,  as  the  Navy,  Military,  and  >  46,000,000 
Ordnance  Stores,  &c.       ...    -        ) 


Grand  Total, 


Equal  to  dollars, 
7 


103,800,0^0 
£3,679,500,000 
17,661,600,000 


K 


AMERICAN  EDITOR. 


74  ON  PRODUCTION.  BOOK  L 


CHAPTER  IV. 

ON  NATURAL  AGENTS  THAT  ASSIST   IN  THE    PRODUCTION  OP  WEALTH,  AND 
SPECIALLY   OP    LAND. 

INDEPENDENTLY  of  the  aid  that  industry  receives  from  capital, 
that  is  to  say,  from  products  of  her  own  previous  creation,  towards 
the  creation  of  still  further  products,  she  avails  herself  of  the  agency 
and  powers  of  a  variety  of  agents  not  of  her  own  creation,  but  offered 
spontaneously  by  nature :  and  from  the  co-operation  of  these  natural 
agents  derives  a  portion  of  the  utility  she  communicates  to  things. 

Thus,  when  a  field  is  ploughed  and  sown,  besides  the  science  and 
the  labour  employed  in  this  operation,  besides  the  pre-created  values 
brought  into  use,  the  values,  for  instance,  of  the  plough,  the  harrow, 
(he  seed-corn,  the  food  and  clothing  consumed  by  labourers  during 
the  process  of  production,  there  is  a  process  performed  by  the  soil, 
the  air,  the  rain,  and  the  sun,  wherein  mankind  bears  no  part,  but 
which  nevertheless  concurs  in  the  creation  of  the  new  product  that 
will  be  acquired  at  the  season  of  harvest.  .This  process  I  call  the 
productive  agency  of  natural  agents. 

The  term  natural  agents  is  here  employed  in  a  very  extensive 
sense;  comprising  not  merely  inanimate  bodies,  whose  agency  ope- 
rates to  the  creation  of  value,  but  likewise  the  laws  of  the  physical 
world,  as  gravitation,  which  makes  the  weight  of  a  clock  descend ; 
magnetism,  which  points  the  needle  of  the  compass :  the  elasticity  of 
steel ;  the  gravity  of  the  atmosphere ;  the  property  of  heat  to  dis- 
charge  itself  by  ignition,  &c.  &c. 

The  productive  faculty  of  capital  is  often  so  interwoven  with  that 
of  natural  agents,  that  it  is  difficult,  or  perhaps  impossible,  to  assign, 
with  accuracy,  their  respective  shares  in  the  business  of  production. 
A  hot-house  for  the  raising  of  exotic  plants,  a  meadow  fertilized  by 
judicious  irrigation,  owe  the  greater  part  of  their  productive  powers 
to  works  and  erections,  the  effect  of  antecedent  production,  which 
foim  a  part  of  the  capital  devoted  to  the  furtherance  of  actual  and 
present  production.  The  same  may  be  said  of  land  newly  cleared 
and  brought  into  cultivation;  of  farm-buildings ;  of  enclosures  ;  and 
of  all  other  permanent  ameliorations  of  a  landed  estate.  These 
values  are  items  of  capital,  though  it  be  no  longer  possible  to  sever 
them  from  the  soil  they  are  attached  to.* 

In  the  employment  of  machinery,  which  wonderfully  augments 
the  productive  power  of  man,  the  product  obtained  is  due  partly  to 
ihe  value  of  the  capital  vested  in  the  machine,  and  partly  to  tho 


*  It  is  for  the  proprietor  of  the  land  and  of  the  capital  respectively,  when  tho 
ownership  is  in  different  persons,  to  settle  between  them  the  respective  value 
un(i  efficacy  of  the  agency  of  these  two  productive  agents.  The  world  at  largo 
may  be  content  to  comprehend,  without  taking  the  trouble  of  measuring,  then 
respective  shares  in  the  production  of  wealth. 


CHAP.  IV.  ON  PRODUCTION.  75 

agency  of  natural  powers.  Suppose  a  tread-mill,*  worked  by  ten 
men,  to  be  used  in  place  of  a  wind-mill,  the  product  of  the  mill 
might  be  considered  as  the  fruit  of  the  productive  agency  of  a  capi- 
tal consisting  of  the  value  of  the  machine,  and  of  the  labour  of  ten 
men  employed  in  turning  the  wheel.  If  the  tread-mill  be  supplant- 
ed by  sails,  it  is  evident  that  the  wind,  a  natural  agent,  does  the  work 
often  human  beings. 

In  this  instance,  the  absence  of  the  natural  agent  might  be  reme- 
died, by  the  employment  of  another  power ;  but  there  are  many 
.»ases,  in  which  the  agency  of  nature  could  not  possibly  be  dispensed 
with,  and  is  yet  equally  positive  and  real ;  for  example,  the  vegeta- 
tive power  of  the  soil,  the  vital  principle  which  concurs  ia  the  pro- 
duction of  the  animals  domesticated  to  our  use.  A  flock  of  sheep 
is  the  joint  result  of  the  owner's  and  shepherd's  care,  and  the  capital 
advanced  in  fodder,  shelter,  and  shearing,  and  of  the  action  of  the 
organs  and  viscera  with  which  nature  has  furnished  these  animals.' 

Thus  nature  is  commonly  the  fellow-labourer  of  man  and  his 
instruments ;  a  fellowship  advantageous  to  him  in  proportion  as  he 
succeeds  in  dispensing  with  his  own  personal  agency,  and  that  of 
his  capital,  and  in  throwing  upon  nature  a  larger  part  of  the  burthen 
of  production. 

Smith  has  taken  infinite  pains  to  explain,  how  it  happens  that 
civilized  communities  enjoy  so  great  an  abundance  of  products,  in 
comparison  with  nations  less  polished,  and  in  spite  of  the  swarm  of 
idlers  and  unproductive  labourers  that  is  to  be  met  with  in  society. 
He  has  traced  the  source  of  that  abundance  to  the  division  of  la- 
bour ;f  and  it  cannot  be  doubted,  that  the  productive  power  of  in- 
dustry is  wonderfully  enhanced  by  that  division,  as  we  shall  here- 
after see  by  following  his  steps ;  but  this  circumstance  alone  is  not 
sufficient  to  explain  a  phenomenon,  that  will  no  longer  surprise,  if 
we  consider  the  power  of  the  natural  agents  that  industry  and  civili- 
zation set  at  work  for  our  advantage. 

Smith  admits  that  human  intelligence,  and  the  knowledge  of  the 
laws  of  nature,  enable  mankind  to  turn  the  resources  she  offers  to 
better  account :  but  he  goes  on  to  attribute  to  the  division  of  labour 
this  very  degree  of  intelligence  and  knowledge :  and  he  is  right  to 
a  certain  degree ;  for  a  man,  by  the  exclusive  pursuit  of  a  single  art 
or  science,  has  ampler  means  of  accelerating  its  progress  towards 
perfection.  But,  when  once  the  system  of  nature  is  discovered,  the 
production  resulting  from  the  discovery,  is  no  longer  the  product  of 
the  inventor's  industry.  The  man  who  first  discovered  the  property 
of  fire  to  soften  metal's,  was  not  the  actual  creator  of  the  utility  this 
process  adds  to  smelted  ore.  That  utility  results  from  the  physical 

*  A  wheel  in  the  form  of  a  drum,  turned  by  men  walking  inside,  (roue  a 
marchre.} 

•I- Take  his  own  words:  "It  is  the  great  multiplication  of  the  productions  of 
all  the  different  arts,  in  consequence  of  the  division  of  labour,  which  occasions, 
in  a  well-rroverned  society,  that  universal  opulence,  which  extends  itself  to  th« 
lowest  ranks  of  the  people."  Wealth  of  Nations,  b.  i.  c.  1. 


76  ON  PRODUCTION.  BOOK  L 

action  of  fire,  in  concurrence,  it  is  true,  with  the  labour  and  capita] 
of  those  who  employ  the  process,  But  are  there  no  processes  tha* 
mankind  owes  the  knowledge  of  to  pure  accident?  or  that  are  so  self- 
evident,  as  to  have  required  no  skill  to  discover?  When  a  tree,  a 
natural  product,  is  felled,  is  society  put  into  possession  of  no  greater 
produce  than  that  of  the  mere  labour  of  the  woodman? 

From  this  error  Smith  has  drawn  the  false  conclusion,  that  all 
values  produced  represent  pre-exerted  human  labour  or  industry, 
either  recent  or  remote ;  or,  in  other  words,  that  wealth  is  nothing 
more  than  labour  accumulated ;  from  which  position  he  infers  a  se- 
cond consequence  equally  erroneous,  viz.  that  labour  is  the  sole 
measure  of  wealth,  or  of  value  produced. 

This  system  is  obviously  in  direct  opposition  to  that  of  the 
economists  of  the  eighteenth  century,  who,  on  the  contrary,  main- 
tained that  labour  produces  no  value  without  consuming  an  equiva- 
lent; that,  consequently,  it  leaves  no  surplus,  no  net  produce;  and  that 
nothing  but  the  earth  produces  gratuitous  value, — therefore  nothing 
else  can  yield  net  produce.  Each  of  these  positions  has  been  re- 
duced to  system ;  I  only  cite  them  to  warn  the  student  of  the  dan- 
gerous consequences  of  an  error  in  the  outset,*  and  to  bring  the 
science  back  to  the  simple  observation  of  facts.  Now  facts  demon- 
strate, that  values  produced  are  referable  to  the  agency  and  concur- 
rence of  industry,  of  capital,f  and  of  natural  agents,  whereof  the 
chief,  though  by  no  means  the  only  one,  is  land  capable  of  cultiva- 
tion ;  and  that  no  other  but  these  three  sources  can  produce  value,  or 
add  to  human  wealth. 

*  Amongst  other  dangerous  consequences  of  the  system  of  the  economists,  is 
the  notable  one  of  substituting  a  land-tax  in  lieu  of  all  other  taxation ;  in  the 
certainty,  that  this  tax  would  affect  all  produced  value  whatever.  Upon  a  con- 
trary principle,  and  in  pursuance  of  the  maxims  laid  down  by  Smith,  the  net 
produce  of  land  and  of  capital  ought  to  be  exempted  from  taxation  altogether,  if 
with  him  we  take  for  granted,  that  they  produce  nothing  spontaneously  ;  but  this 
would  be  as  unjust  on  the  opposite  side. 

f  Although  Smith  has  admitted  the  productive  power  of  land,  he  has  disre- 
garded the  completely  analogous  power  of  capital.  A  machine,  an  oil-mill  for 
example,  which  employs  a  capital  of  4000  dollars,  and  gives  an  annual  net  return 
of  200  dollar.3,  after  paying  all  expenses,  gives  a  product  quite  as  substantial  as  that 
of  a  real  estate,  that  cost  4000  dollars,  and  brings  an  annual  rent  or  net  produce 
of  200  dollars,  all  charges  deducted.  Smith  maintains,  that  a  mill  which  has  cost 
4000  dollars,  represents  labour  to  that  amount,  bestowed  at  sundry  times  upon  the 
different  parts  of  its  fabric ;  therefore,  that  the  net  produce  of  the  mill  is  the  net  pro- 
duce of  that  precedent  labour.  But  he  is  mistaken :  granting  for  argument  sake,  the 
value  of  the  mill  itself  to  be  the  value  of  this  previous  labour;  yet  the  value  daily 
produced  by  the  mill  is  a  new  value  altogether;  just  the  same  as  the  rent  of  a 
'anded  estate  is  a  totally  different  value  from  the  value  of  the  estate  itself,  and 
may  be  consumed,  without  at  all  affecting  the  value  of  the  estate.  If  capital 
contained  in  itself  no  productive  faculty,  independent  of  that  of  the  labour  which 
created  it,  how  is  it  possible,  that  capital  could  furnish  a  revenue  in  perpetuity, 
independent  of  the  profit  of  the  industry  that  employed  it?  The  labour  that 
created  the  capital  would  receive  wages  after  it  ceased  to  operate — would  have 
Titerminable  value ;  which  is  absurd.  It  will  be  seen  by-and-by,  that  these 
notions  have  not  been  mere  matter  of  speculation. 


CHAP.  V.  ON  PRODUCTION.  77 

Of  natural  agents,  some  are  susceptible  of  appropriation,  that  is 
to  say  of  becoming  the  property  of  an  occupant,  as  a  field,  a  cur- 
rent of  water ;  others  can  not  be  appropriated,  but  remain  liable  to 
public  use,  as  the  wind,  the  sea,  free  navigable  streams,  the  physical 
or  chemical  action  of  bodies  one  upon  another,  &c.  &.c. 

We  shall  by-and-by  have  an  opportunity  of  convincing  ourselves, 
that  this  alternative,  of  productive  agents  being  or  not  being  suscep- 
tible of  appropriation,  is  highly  favourable  to  the  progress  of  wealth. 
Natural  agents,  like  land,  which  are  susceptible  of  appropriation, 
would  not  produce  nearly  so  much,  were  not  the  proprietors  certain 
of  exclusively  gathering  their  produce,  and  able  to  vest  in  them, 
with  full  confidence,  the  capital  which  so  much  enlarges  their  pro- 
ductiveness. On  the  other  hand,  the  indefinite  latitude  allowed  to 
industry  to  occupy  at  will  the  unappropriated  natural  agents,  opens 
a  boundless  prospect  to  the  extension  of  her  agency  and  production. 
It  is  not  nature,  but  ignorance  and  bad  government,  that  limit  the 
productive  powers  of  industry. 

Such  of  the  natural  agents  as  are  susceptible  of  appropriation, 
form  an  item  of  productive  means ;  for  they  do  not  yield  their  con- 
currence without  equivalent ;  which  equivalent,  as  we  shall  see  in  the 
proper  place,  forms  an  item  of  the  revenues  of  the  appropriators. 
At  present  we  must  be  content  to  investigate  the  productive  opera- 
tion of  natural  agents  of  every  description,  whether  already  known, 
or  hereafter  to  be  discovered. 


CHAPTER  V. 

ON  THE    MODE    IN   WHICH   INDUSTRY,  CAPITAL,  AND  NATURAL    AGENTS 
UNITE    IN    PRODUCTION. 

WE  have  seen  how  industry,  capital,  and  natural  agents  concur  in 
production,  each  in  its  respective  department ;  and  we  have  likewise 
seen  that  these  three  sources  are  indispensable  to  the  creation  of 
products.  It  is  not,  however,  absolutely  necessary  that  they  should 
all  belong  to  the  same  individual. 

An  industrious  person  may  lend  his  industry  to  another  possessed 
of  capital  and  land  only. 

The  landholder  may  lend  his  estate  to  a  person  possessing  capital 
and  industry  only. 

Whether  the  thing  lent  be  industry,  capital,  or  land,  inasmuch  as 
all  three  concur  in  the  creation  of  value,  their  use  also  bears  value, 
and  is  commonly  paid  for. 

The  price  paid  for  the  loan  of  industry  is  called  wages. 

The  price  paid  for  the  loan  of  capital  is  called  interest. 

And  that  paid  for  the  loan  of  land  is  called  rent. 
7* 


78  ON  PRODUCTION.  BOOK  I. 

The  ownership  of  land,  capital,  and  industry  is  sometimes  united 
in  the  same  hands.  A  man  who  cultivates  his  own  garden  at  his 
own  expense,  is  at  once  the  possessor  of  land,  capital,  and  industry, 
and  exclusively  enjoys  the  profits  of  proprietor,  capitalist,  and 
labourer. 

The  knife-grinder's  craft  requires  no  occupancy  of  land ;  he  car- 
ries his  stock  in  trade  upon  his  shoulders,  and  his  skill  and  industry 
at  his  fingers'  ends ;  being  at  the  same  time  adventurer,  (a)  capitalist. 
and  labourer. 

It  is  seldom  that  we  meet  with  adventurers  in  industry  so  poor, 
as  not  to  own  at  least  a  share  of  the  capital  embarked  in  their  con 
cern.  Even  the  common  labourer  generally  advances  some  portion ; 
the  bricklayer  comes  with  his  trowel  in  his  hand ;  the  journeyman 
tailor  is  provided  with  his  thimble  and  needles ;  all  are  clothed  better 
or  worse ;  and  though  it  be  true,  that  their  clothing  must  be  found 
out  of  their  wages,  still  they  find  it  themselves  in  advance. 

Where  the  land  is  not  exclusive  property,  as  is  the  case  with 
some  stone-quarries,  with  public  rivers  and  seas  to  which  industry 
resorts  for  fish,  pearls,  coral,  &c.,  products  may  be  obtained  by 
industry  and  capital  only. 

Industry  and  capital  are  likewise  competent  to  produce  by  them- 
selves, when  that  industry  is  employed  upon  products  of  foreign 
growth,  procurable  by  capital  only ;  as  in  the  European  manufac- 
ture of  cotton  and  many  other  articles.  So  that  every  class  of 
manufacture  is  competent  to  raise  products,  provided  there  be  in- 
dustry and  capital  exerted.  The  presence  of  land  is  not  absolutely 
necessary,  unless  perhaps  the  area  whereon  the  work  is  done,  and 
which  is  commonly  rented,  may  be  thought  to  come  under  this 
description,  as  in  extreme  strictness  it  certainly  must.  However, 
if  the  ground  where  the  business  of  industry  is  carried  on,  be 
reckoned  as  land  used,  it  must  at  least  be  admitted,  that,  with  aid  of 
a  large  capital, an  immense  manufacturing  concern  may  be  conducted 
upon  a  very  trifling  spot  of  ground.  Whence  this  conclusion  may  be 
drawn,  that  national  industry  is  limited,  not  by  territorial  extent, 
but  by  extent  of  capital. 

A  stocking  manufacturer  with  a  capital  say  of  4000  dollars,  may 
keep  in  constant  work  ten  stocking  frames.  If  he  manages  to  double 
his  capital  he  can  employ  twenty ;  that  is  to  say,  he  may  buy  ten  more 
frames,  pay  double  ground-rent,  purchase  double  the  quantity  of 
silk  or  cotton  to  be  wrought  into  stockings,  and  make  the  requisite 
advances  to  double  the  number  of  workmen,  &c.  &c. 

But  that  portion  of  agricultural  industry,  devoted  to  the  tillage  of 

(a)  The  term  entrepreneur  is  difficult  to  render  in  English ;  the  corresponding 
word,  undertaker,  being  already  appropriated  to  a  limited  sense.  It  signifies 
the  master-manufacturer  in  manufacture,  the  farmer  in  agriculture,  and  the  mer- 
chant in  commerce ;  and  generally  in  all  three  branches,  the  person  who  takes 
npon  himself  the  immediate  responsibility,  risk,  and  conduct  of  a  concern  of 
industry,  whether  upon  his  own  or  a  borrowed  capital.  For  want  of  a  better 
word,  it  will  be  rendered  into  English  by  the  term  adventurer.  T. 


CHAP.  VI.  ON  PRODUCTION. 


79 


land,  is,  in  the  course  of  nature,  limited  by  extent  of  surface.  Neither 
individuals  nor  communities  can  extend  or  fertilize  their  territory, 
beyond  what  the  nature  of  things  permits ;  but  they  have  unlimited 
power  of  enlarging  their  capital,  and  consequently,  of  setting  at 
work  a  larger  body  of  industry,  and  thus  of  multiplying  their  pro- 
ducts ;  in  other  words,  their  wealth. 

There  have  been  instances  of  people,  like  the  Genevese,  who  with 
a  territory  that  has  not  produced  the  twentieth  part  of  the  necessa- 
ries of  life,  have  yet  contrived  to  live  in  affluence.  The  natives  of 
the  barren  glens  of  Jura  are  in  easy  circumstances  because  many 
mechanical  arts  are  there  practised.  In  the  13th  century,  the  world 
beheld  the  republic  of  Venice,  ere  it  held  a  foot  of  land  in  Italy, 
derive  wealth  enough  from  its  commerce  to  possess  itself  of  Dalma- 
tia,  together  with  most  of  the  Greek  isles,  and  even  the  capital  of 
the  Greek  empire.  The  extent  and  fertility  of  a  nation's  territory 
depend  a  good  deal  upon  its  fortunate  position.  Whereas  the  power 
of  its  industry  and  capital  depends  upon  its  own  good  management ; 
for  it  is  always  competent  to  improve  the  one  and  augment  the 
other. 

Nations  deficient  in  capital,  labour  under  great  disadvantage  in  the 
sale  of  their  produce;  being  unable  to  sell  at  long  credit,  or  to 
grant  time  or  accommodation  to  their  home  or  foreign  customers.  If 
the  deficiency  be  very  great  indeed,  they  may  be  unable  even  to 
make  the  advance  of  the  raw  material  and  their  own  industry.  This 
accounts  for  the  necessity,  in  the  Indian  and  Russian  trade,  of  re- 
mitting the  purchase-money  six  months  or  sometimes  a  year  in 
advance,  before  the  time  when  an  order  for  goods  can  be  executed. 
These  nations  must  be  highly  favoured  in  other  respects,  or  they 
never  could  make  considerable  sales  in  the  face  of  such  a  disad- 
vantage. 

Having  informed  ourselves  of  the  method  in  which  the  three 
great  agents  of  production,  industry,  capital  and  natural  agents,  con- 
cur in  the  creation  of  products,  that  is  to  say,  of  things  applicable 
to  the  uses  of  mankind,  let  us  proceed  to  analyze  more  minutely  the 
particular  operation  of  each.  The  inquiry  is  important,  inasmuch 
as  it  leads  imperceptibly  to  the  knowledge  of  what  is  more  and  what 
is  less  favourable  to  production,  the  true  source  of  individual  affluence, 
as  w°ll  as  national  power. 


CHAPTER  VI. 

OF    OPERATIONS    ALIKE   COMMON    TO    ALL,    BRANCHES    OF    INDUSTRY. 

IF  we  examine  closely  the  workings  of  human  industry,  it  will  be 
founn,  mat,  to  whatever  object  it  be  applied,  it  consists  of  three  dis* 
tinct  operations. 


80  ON  PRODUCTION.  BOOK  I. 

The  first  step  towards  the  attainment  of  any  specific  product,  is 
the  study  of  the  laws  and  course  of  nature  regarding  that  product. 
A  lock  could  never  have  been  constructed  without  a  previous  know- 
ledge of  the  properties  of  iron,  the  method  of  extracting  from  the 
mine  and  refining  the  ore,  as  well  as  of  mollifying  and  fashioning 
the  metal. 

The  next  step  is  the  application  of  this  knowledge  to  an  useful  pur- 
pose: for  instance,  the  conclusion,  or  conviction,  that  a  particulai 
form,  communicated  to  the  metal,  will  furnish  the  means  of  closing  a 
door  to  all  the  wards,  except  to  the  possessor  of  the  key. 

The  last  step  is  the  execution  of  the  manual  labour,  suggested  and 
pointed  out  by  the  two  former  operations;  as,  for  instance,  the 
forging,  filing,  and  putting  together  of  the  different  component  parts 
of  the  lock. 

These  three  operations  are  seldom  performed  by  one  and  the  same 
person.  It  commonly  happens,  that  one  man  studies  the  laws  and 
conduct  of  nature;  that  is  to  say,  the  philosopher,  or  man  of  science, 
of  whose  knowledge  another  avails  himself  to  create  useful  products, 
being  either  agriculturist,  manufacturer,  or  trader ;  while  the  third 
supplies  the  executive  exertion,  under  the  direction  of  the  former 
two  ;  which  third  person  is  the  operative  workman  or  labourer. 

All  products  whatever  will  be  found,  on  analysis,  to  derive  exist- 
ence from  these  three  operations. 

Take  the  example  of  a  sack  of  wheat,  or  a  pipe  of  wine.  The  first 
stage  towards  the  attainment  of  either  of  these  products  was,  the 
discovery  by  the  natural  philosopher  or  geologist,  (a)  of  the  con- 
duct and  course  of  nature  in  the  production  of  the  grain  or  the  grape ; 
the  proper  season  and  soil  for  sowing  or  planting  ;  and  the  care  requi- 
site to  bring  the  herb  or  plant  to  maturity.  The  tenant,  if  not  the 
proprietor  himself,  must  afterward  have  applied  this  knowledge  to 
his  own  particular  object,  brought  together  the  means  requisite  to 
the  creation  of  an  useful  product,  and  removed  the  obstacles  in  the 
way  of  its  creation.  Finally,  the  labourer  must  have  turned  up  the 
soil,  sown  the  seed,  or  pruned  and  bound  up  the  vine.  These  three 
distinct  operations  were  indispensable  to  the  complete  production  of 
the  product,  corn  or  wine. 

Or  take  the  example  of  a  product  of  external  commerce;  such  as 
indigo.  The  science  of  the  geographer,  the  traveller,  the  astro- 
nomer, brings  us  acquainted  with  the  spot  where  it  is  to  be  met  with, 
and  the  means  of  crossing  the  seas  to  get  at  it.  The  merchant  equips 
his  vessels,  and  sends  them  in  quest  of  the  commodity ;  and  the 
mariner  and  land-carrier  perform  the  mechanical  part  of  this  pro- 
duction. 

But,  loooking  at  the  substance,  indigo,  as  a  mere  primary  material 
of  a  further  or  secondary  product,  of  blue  cloth  for  instance;  we  all 

(a)  Agronome :  I  am  not  aware  of  any  corresponding  English  term,  denoting; 
tlie  student  in  that  branch  of  geology  conversant  with  the  properties  of  the  sur- 
face of  the  earth  ;  in  other  words,  the  scientific  agriculturist.  T 


CHAP.  VL  ON  PRODUCTION. 


81 


know  that  the  chemist  is  first  applied  to  for  information,  as  to  the 
nature  of  the  substance,  the  method  of  dissolving  it,  and  mordants 
requisite  for  fixing  the  colour ;  the  means  of  perfecting  the  process 
of  dyeing  are  then  collected  by  the  master  manufacturer,  undei 
whose  orders  the  labourer  executes  the  manual  part  of  the  process. 

Industry  is,  in  all  cases,  divisible  into  theory,  application,  and 
execution.  Nor  can  it  approximate  to  perfection  in  any  nation,  til! 
that  nation  excel  in  all  three  branches.  A  people,  that  is  deficient 
in  one  or  other  of  them  cannot  acquire  products,  which  are  and 
must  be  the  result  of  all  three.  And  thus  we  may  learn  to  appreci- 
ate the  vast  utility  of  many  sciences,  which,  at  first  sight,  appear  to 
be  the  objects  of  mere  curiosity  and  speculation.* 

The  negroes  of  the  coast  of  Africa  are  possessed  of  considerable 
ingenuity,  and  excel  in  all  athletic  exercises  and  handicraft  occupa- 
tions ;  but  they  seem  greatly  deficient  in  the  two  previous  operations 
of  industry.  Wherefore,  they  are  under  the  necessity  of  purchasing 
from  Europe  the  stuffs,  arms,  and  ornaments,  they  stand  in  need  of. 
Their  country  yields  so  few  products,  notwithstanding  its  natural 
fertility,  that  the  slave  traders  are  obliged  to  lay  in  their  stock  of 
provisions  beforehand,  to  feed  the  slaves  during  the  voyage.f 

In  qualities  favourable  to  industry,  the  moderns  have  greatly  sur- 
passed the  ancients,  and  the  Europeans  outstrip  all  the  other  nations 
of  the  globe.  The  meanest  inhabitant  of  an  European  town  enjoys 
innumerable  comforts  unattainable  to  the  sovereign  of  a  savage  tribe. 
The  single  article,  glass,  that  admits  light  into  his  apartment,  and,  at 
the  same  time,  excludes  the  inclemency  of  the  weather,  is  the  beauti- 
ful result  of  observation  and  science,  accumulated  and  perfected 
during  a  long  course  of  ages.  To  obtain  this  luxury,  it  was  neces- 
sary previously  to  know  what  kind  of  sand  was  convertible  into  a 
substance  possessing  extension,  solidity,  and  transparency;  as  well  as 
by  the  compound  of  what  ingredients,  and  by  what  degree  of  heat, 
the  substance  was  obtainable:  to  ascertain,  besides,  the  best  form  of 
furnace.  The  very  wood- work,  that  supports  the  roof  of  a  glass-house, 
requires,  in  its  construction,  the  most  extensive  knowledge  of  the 
strength  of  timber,  and  the  means  of  employing  it  to  advantage. 

Nor  was  the  mere  knowledge  of  these  matters  sufficient ;  for  that 
knowledge  might  possibly  have  lain  dormant  in  the  memory  of  one 
or  two  persons,  or  in  the  pages  of  literature.  It  was  further  requi- 

*  Besides  the  direct  impulse,  given  by  science  to  progressive  industry,  and 
which  indeed  is  indispensable  to  its  success,  it  affords  an  indirect  assistance,  by 
the  gradual  removal  of  prejudice;  and  by  teaching  mankind  to  rely  more  upon 
their  own  exertions,  than  on  the  aid  of  superhuman  power.  Ignorance  is  the 
inseparable  concomitant  of  practical  habits,  of  that  slavery  of  custom  which  stands 
in  the  way  of  all  improvement;  it  is  ignorance  that  imputes  to  a  supernatural 
cause  the  ravages  of  an  epidemical  disease,  which  might  perhaps  be  easily  pre- 
vented or  eradicated,  and  makes  mankind  recur  to  superstitious  observances, 
when  precaution,  or  the  application  of  the  remedy,  is  all  that  is  wanted.  Sci- 
ences, like  facts,  are  linked  together  by  a  chain  of  general  connexion,  and  }ie'<l 
one  another  mutual  support  and  corroboration. 

f  See  CEuvres  de  Poivrf,  p.  77,  78. 

•4 


82  ON  PRODUCTION.  BOOK  I. 

site,  that  a  manufacturer  should  have  been  found,  possessed  of  the 
means  of  reducing  the  knowledge  into  practice ;  who  should  have 
at  first  made  himself  master  of  all  that  was  known  of  that  par- 
ticular branch  of  industry,  and  afterwards  have  accumulated,  01 
procured  the  requisite  capital,  collected  artificers  and  labourers,  and 
assigned  to  each  his  respective  occupation. 

Finally,  the  work  must  have  been  completed  by  the  manual  skill 
of  the  workmen  employed ;  some  in  constructing  the  buildings  and 
furnaces,  some  in  keeping  up  the  fire,  mixing  up  the  ingredients, 
blowing,  cutting,  rolling  out,  fitting  and  fixing  the  pane  of  glass. 
The  utility  and  beauty  of  the  resulting  product,  are  inconceivable  to 
those  who  have  never  beheld  this  admirable  creation  of  human  in- 
dustry. By  means  of  industry,  the  vilest  materials  have  been  in- 
vested with  the  highest  degree  of  utility.  The  very  rags  and  refuse 
of  wearing  apparel  have  been  transformed  into  the  white  and  thin 
sheets,  that  convey  from  one  end  of  the  globe  to  the  other,  the  re- 
quisitions of  commerce  and  the  particulars  of  art ;  that  serve  as  the 
depositories  of  the  conceptions  of  genius,  and  the  vehicles  of  human 
experience  from  one  age  to  another ;  to  them  we  look  for  the  evi- 
dence of  our  properties ;  to  them  we  entrust  the  most  noble  and 
amiable  sentiments  of  the  heart,  and  by  them  we  awaken  corre- 
sponding feelings  in  the  breasts  of  our  fellow-creatures.  The  extra- 
ordinary facilities  for  the  communication  of  human  intelligence  which 
Eaper  affords,  entitles  it  to  be  considered  as  one  of  the  products  that 
ave  been  most  efficacious  in  ameliorating  the  condition  of  mankind. 
Fortunate,  indeed,  would  it  have  been,  had  an  engine  so  powerful 
never  have  been  made  the  vehicle  of  falsehood,  or  the  instrument 
of  tyranny! 

It  is  worth  while  to  remark,  that  the  knowledge  of  the  man  of 
science,  indispensable  as  it  is  to  the  development  of  industry,  circu 
lates  with  ease  and  rapidity  from  one  nation  to  all  the  rest.  And 
men  of  science  have  themselves  an  interest  in  its  diffusion ;  for  upon 
that  diffusion  they  rest  their  hopes  of  fortune,  and,  what  is  more 
prized  by  them,  of  reputation  too.  For  this  reason,  a  nation,  in 
which  science  is  but  little  cultivated,  may  nevertheless  carry  its  in- 
dustry to  a  very  great  length,  by  taking  advantage  of  the  information 
derivable  from  abroad.  But  there  is  no  way  of  dispensing  with  the 
other  two  operations  of  industry,  the  art  of  applying  the  knowledge 
of  man  to  the  supply  of  his  wants,  and  the  skill  of  execution.  These 
qualities  are  of  advantage  to  none  but  their  possessors ;  so  that  a 
country  well  stocked  with  intelligent  merchants,  manufacturers,  and 
agriculturists  has  more  powerful  means  of  attaining  prosperity,  than 
one  devoted  chiefly  to  the  pursuit  of  the  arts  and  sciences.  At  the 
period  of  the  revival  of  literature  in  Italy,  Bologna  was  the  seat  of 
science ;  but  wealth  was  centred  in  Florence,  Genoa,  and  Venice. 

In  our  days,  the  enormous  wealth  of  Britain  is  less  owing  to  her 
own  advances  in  scientific  acquirements,  high  as  she  ranks  in  that 
department,  than  to  the  wonderful  practical  skill  of  her  adventurers 
in  the  useful  application  of  knowledge,  and  the  superiority  of  her 


CHAP.  VI.  ON  PRODUCTION.  83 

workmen  in  rapid  and  masterly  execution.  The  national  pride,  that 
the  English  are  often  charged  with,  does  not  prevent  their  accom- 
modating themselves  with  wonderful  facility  to  the  tastes  of  their 
customers  and  the  consumers  of  their  produce.  They  supply  with 
hats  both  the  north  and  the  south,  because  they  have  learnt  to  make 
them  light  for  the  one  market,  and  warm  and  thick  for  the  other. 
Whereas  the  nation  that  makes  but  of  one  pattern,  must  be  content 
with  the  home  market  only. 

The  English  labourer  seconds  the  master  manufacturer;  he  is 
commonly  patient  and  laborious,  and  does  not  willingly  send  out  an 
article  from  his  hands,  without  giving  it  the  utmost  possible  preci- 
sion and  perfection ;  not  that  he  bestows  more  time  upon  it,  but  that 
he  gives  it  more  of  his  care,  attention  and  diligence,  than  the  work- 
men of  most  other  nations. 

There  is  no  people,  however,  that  need  despair  of  acquiring  the 
qualities  requisite  to  the  perfection  of  their  industry.  It  is  but  150 
years  since  England  herself  had  made  so  little  progress,  that  she  pur- 
chased nearly  all  her  woollens  from  Belgium ;  and  it  is  not  more  than 
80  years  since  Germany  supplied  with  cotton  goods  the  very  nation, 
that  now  manufactures  them  for  the  whole  world.* 

I  have  said  that  the  cultivator,  the  manufacturer,  the  trader,  make 
it  their  business  to  turn  to  profit  the  knowledge  already  acquired, 
and  apply  it  to  the  satisfaction  of  human  wants.  I  ought  further  to 
add,  that  they  have  need  of  knowledge  of  another  kind,  which  can 
only  be  gained  in  the  practical  pursuit  of  their  respective  occupa- 
tions, and  may  be  called  their  technical  skill.  The  most  scientific 
naturalist,  with  all  his  superior  information,  would  probably  succeed 
much  worse  than  his  tenant,  in  the  attempt  to  improve  his  own  land. 
A  first-rate  mechanist  would  most  likely  spin  very  indifferently 
without  having  served  his  Apprenticeship,  though  admirably  skilled 
in  the  construction  of  the  cotton-machinery.  In  the  arts  there  is  a 
certain  sort  of  perfection,  that  results  only  from  repeated  trials, 
sometimes  successful  and  sometimes  the  contrary.  So  that  science 
alone  is  not  sufficient  to  ensure  the  progress,  without  the  aid  of  ex- 
periment, which  is  always  attended  with  more  or  less  of  risk,  and 
does  not  always  indemnify  the  adventurer,  whose  profit,  even  when 
successful,  is  moderated  by  competition ;  although  society  at  large 
receives  the  accession  of  a  new  product,  or,  what  amounts  to  the 
same  thing,  of  an  abatement  in  the  price  of  an  old  one. 

In  agriculture,  experiments  usually  cost  the  rent  of  the  soil"  for  a 
year  or  more,  over  and  above  the  labour  and  the  capital  engaged 
in  them. 

*  The  cotton  manufacture  did  not  exist  in  England  in  the  17th  century,  lu 
1705,  we  see  by  the  returns  of  the  English  customs,  that  the  raw  cotton  manu- 
factured in  that  country  then  amounted  to  no  more  than  1,170,880  pounds  weight, 
In  1785,  the  quantity  imported  was  6,706,000  Ibs. ;  but  in  1790  it  had  got  up  to 
25,941,000  Ibs.,  and  in  1817  to  as  much  as  131,951,000  Ibs.,  for  the  English 
market  and  for  re-exportation.  The  quantity  of  cotton  imported  in  1831  inU> 
the  United  Kingdoms,  was  288,708,453  Ibs. 


84  ON  PRODUCTION.  BOOK  L 

In  manufacture,  experiment  is  hazarded  on  safer  grounds  of  cal- 
culation, capital  engaged  for  a  much  shorter  period,  and  if  success 
ensue,  the  adventurer  rewarded  by,  a  longer  period  of  exclusive  ad- 
vantage, because  his  process  is  less  open  to  observation.  In  some 
places,  too,  the  exclusive  advantage  is  protected  by  patents  of  inven- 
tion. For  all  which  reasons,  the  progress  of  manufacturing  is  gene- 
rally more  rapid  and  more  diversified  than  that  of  agricultural 
industry. 

In  commercial  industry,  the  risk  of  experiment  would  be  greater 
than  in  the  other  two  branches,  if  the  costs  of  the  adventure  had  no 
auxiliary  and  concurrent  object.  But  it  is  usually  in  the  course  of  a 
regular  trade,  that  a  merchant  hazards  the  introduction  of  a  virgin 
commodity  of  foreign  growth  into  an  untried  market.  In  this  man- 
ner it  was  that  the  Dutch,  about  the  middle  of  the  seventeenth  cen- 
tury, while  prosecuting  their  commerce  with  China,  with  no  very 
sanguine  expectation,  made  experiment  of  a  small  assortment  of  dried 
leaves,  from  which  the  Chinese  were  in  the  habit  of  preparing  their  fa- 
vourite beverage.  Thus  commenced  the  tea-trade,  which  now  occa- 
sions the  annual  transport  of  more  than  45  millions  of  pounds  weight, 
that  are  sold  in  Europe  for  a  sum  of  more  than  80,000,000  of  dollars.* 

In  some  cases  of  very  rare  occurrence,  boldness  is  nearly  certain 
of  success.  When  the  Europeans  had  recently  discovered  the  pas 
sage  round  the  Cape  of  Good  Hope  and  the  continent  of  America, 
their  world  was  suddenly  expanded  to  the  East  and  West ;  and  such 
was  the  infinity  of  new  objects  of  desire  in  two  hemispheres,  whereof 
one  was  not  at  all,  and  the  other  but  very  imperfectly  known  before, 
that  an  adventurer  had  only  to  make  the  voyage,  and  was  sure  of 
selling  his  returns  to  great  advantage. 

In  alt  but  such  extraordinary  cases  it  is  perhaps  prudent  to  defray 
the  charges  of  experiments  in  industry,  not  out  of  the  capital  en- 
gaged in  the  regular  and  approved  channels  of  production,  but  out 
of  the  revenue  that  individuals  have  to  dispose  of  at  pleasure,  with- 
out fear  of  impairing  their  fortune.  The  whims  and  caprices  that 
divert  to  an  useful  end  the  leisure  and  revenue  which  most  men 
devote  to  mere  amusement,  or  perhaps  to  something  worse,  cannot 
be  too  highly  encouraged.  I  can  conceive  no  more  noble  employ- 
ment of  wealth  and  talent.  A  rich  and  philanthropic  individual 
may,  in  this  way,  be  the  means  of  conferring  upon  the  industrious 
classes,  and  upon  the  consumers  at  large,  in  other  words,  upon  the 
mass  of  mankind,  a  benefit  far  beyond  the  mere  value  of  what  he  ac 
tually  disburses,  perhaps  beyond  the  whole  amount  of  his  fortune 
however  princely  it  may  be.  Who  will  attempt  to  calculate  the  value 
conferred  on  mankind  by  the  unknown  inventor  of  the  plough ?f 

A  government,  that  knows  and  practises  its  duties,  and  has  large 
resources  at  its  disposal,  does  not  abandon  to  individuals  the  whole 

*  Voyage  Commerciel  et  Politique  aux  Indes  Orientales,  par  M.  Felix 
Kenouard  de  Sainte  Croix. 

t  Thanks  to  the  art  of  Printing,  the  names  of  the  benefactors  of  mankind  will 
Henceforward  be  lastingly  recorded ;  and  if  I  mistake  not,  with  more  veneration 


CHAP.  VH.  ON  PRODUCTION.  85 

glory  and  merit  of  invention  and  discovery  in  the  field  of  industry. 
The  charges  of  experiment,  when  defrayed  by  the  government,  are 
not  subtracted  from  the  national  capital,  but  from  the  national 
revenue ;  for  taxation  never  does,  or,  at  least,  never  ought  to  touch 
any  thing  beyond  the  revenue  of  individuals.  The  portion  of  them 
so  spent  is  scarcely  felt  at  all,  because  the  burthen  is  divided  among 
innumerable  contributors ;  and,  the  advantages  resulting  from  suc- 
cess being  a  common  benefit  to  all,  it  is  by  no  means  inequitable 
that  the  sacrifices,  by  which  they  are  obtained,  should  fall  on  the 
community  at  large. 


CHAPTER  VH. 

OF  THE   LABOUR  OP  MANKIND,  OF   NATURE,   AND   OF  MACHINERY 
RESPECTIVELY. 

BY  the  term  labour  I  shall  designate  that  continuous  action,  exert- 
ed to  perform  any  one  of  the  operations  of  industry,  or  a  part  only 
of  one  of  those  operations. 

Labour,  upon  whichever  of  those  operations  it  be  bestowed,  is 
productive,  because  it  concurs  in  the  creation  of  a  product.  Thus 
the  labour  of  the  philosopher,  whether  experimental  or  literary,  is 
productive  ;  the  labour  of  the  adventurer  or  master-manufacturer  is 
productive,  although  he  perform  no  actual  manual  work ;  the  labour 
of  every  operative  workman  is  productive,  from  the  common  day- 
labourer  in  agriculture,  to  the  pilot  that  governs  the  motion  of  a  ship. 

Labour  of  an  unproductive  kind,  that  is  to  say,  such  as  does  not 
contribute  to  the  raising  bf  the  products  of  some  branch  of  industry 
or  other,  is  seldom  undertaken  voluntarily;  for  labour,  under  the 
definition  above  given,  implies  trouble,  and  trouble  so  bestowed 
could  yield  no  compensation  or  resulting  benefit:  wherefore,  it 
would  be  mere  folly  or  waste  in  the  person  bestowing  it.  When 
trouble  is  directed  to  the  stripping  another  person  of  the  goods  in 
his  possession  by  means  of  fraud  or  violence,  what  was  before  mere 
extravagance  and  folly,  degenerates  to  absolute  criminality;  and 
there  results  no  production,  but  only  a  forcible  transfer  of  wealth 
from  one  individual  to  another. 

Man,  as  we  have  already  seen,  obliges  natural  agents,  and  even 

than  those  which  derive  lustre  from  the  deplorable  exploits  of  military  prowess. 
Among  these  will  be  preserved  the  names  of  Olivier  de  Serres,  the  father  of 
French  agriculture;  the  first  who  established  an  experimental  farm;  of  Duhamel, 
of  Malsherbes,  to  whom  France  is  indebted  for  many  vegetables  now  naturalized 
in  her  soil  and  climate:  of  Lavoisier,  whose  new  system  of  chemistry  has  effect- 
ed a  still  more  important  revolution  in  the  arts ;  and  of  the  numerous  scientific 
travellers  of  modern  times ;  for  travels,  with  an  useful  object,  may  be  regarded 
as  adventures  in  the  field  of  industry. 
8 


86  ON  PRODUCTION.  BOOK  1. 

the  products  of  his  own  previous  industry,  to  work  in  concert  with 
him  in  the  business  of  production.  There  will,  therefore,  be  no 
difficulty  in  comprehending  the  terms  labour  or  productive  service 
of  nature,  and  labour  or  productive  service  of  capital. 

The  labour  performed  by  natural  agents,  and  that  executed  by 
pre-existent  products,  to  which  we  have  given  the  name  of  capital, 
are  closely  analogous,  and  are  perpetually  confounded  one  with  the 
other:  for  the  tools  and  machines  which  form  a  principal  item  of 
capital,  are  commonly  but  expedients  more  "or  less  ingenious,  foi 
turning  natural  powers  to  account.  The  steam  engine  is  but  a  com- 
plicated method  of  taking  advantage  of  the  alternation  of  the  elas- 
ticity of  water  reduced  to  vapour,  and  of  the  weight  of  the  atmo- 
sphere. So  that,  in  point  of  fact,  a  steam  engine  employs  more  pro- 
ductive agency,  than  the  agency  of  the  capital  embarked  in  it :  for 
that  machine  is  an  expedient  for  forcing  into  the  service  of  man  a 
variety  of  natural  agents,  whose  gratuitous  aid  may  perhaps  infinitely 
exceed  in  value  the  interest  of  the  capital  invested  in  the  machine. 

It  is  in  this  light  that  all  machinery  must  be  regarded,  from  the 
simplest  to  the  most  complicated  instrument,  from  a  common  file  to 
the  most  expensive  and  complex  apparatus.  Tools  are  but  simple 
machines,  and  machines  but  complicated  tools,  whereby  we  enlarge 
the  limited  powers  of  our  hands  and  fingers;  and  both  are,  in  many 
respects,  mere  means  of  obtaining  the  co-operation  of  natural  agents.* 
Their  obvious  effect  is  to  make  less  labour  requisite  for  the  raising 
the  same  quantity  of  produce,  or,  what  comes  exactly  to  the  same 
thing,  to  obtain  a  larger  produce  from  the  same  quantity  of  human 
labour. — And  this  is  the  grand  object  and  the  acme  of  industry. 

Whenever  a  new  machine,  or  a  new  and  more  expeditious  process 
is  substituted  in  the  place  of  human  labour  previously  in  activity, 
part  of  the  industrious  human  agents,  whose  service  is  thus  ingeni- 
ously dispensed  with,  must  needs  be  thrown*  out  of  employ.  Whence 
many  objections  have  been  raised  against  the  use  of  machinery, 
which  has  been  often  obstructed  by  popular  violence,  and  sometimes 
by  the  act  of  authority  itself. 

To  give  any  chance  of  wise  conduct  in  such  cases,  it  is  necessary 
beforehand  to  acquire  a  clear  notion  of  the  economical  effect  result- 
ing from  the  introduction  of  machinery. 

A  new  machine  supplants  a  portion  of  human  labour,  but  does 
not  diminish  the  amount  of  the  product;  if  it  did,  it  would  be  absurd 
to  adopt  it.  When  water-carriers  are  relieved  in  the  supply  of  a  city 
by  any  kind  of  hydraulic  engine,  the  inhabitants  are  equally  well 
supplied  with  water.  The  revenue  of  the  district  is  at  least  as 
great,  but  it  takes  a  different  direction.  That  of  the  water-carriers 
is  reduced,  while  that  of  the  mechanists  and  capitalists,  who  furnish 

*  Generalization  may  at  pleasure  be  carried  still  further ;  a  landed  estate  may 
l»e  considered  as  a  vast  machine  for  the  production  of  grain,  which  is  refitted  and 
Kept  in  repair  by  cultivation :  or  a  flock  of  sheep  as  a  machine  for  the  raising  of 
mution  or  wool. 


CHAP.  VIL  ON  PRODUCTION.  87 

the  funds,  is  increased.  But,  if  the  superior  abundance  of  the  pro- 
duct and  the  inferior  charges  of  its  production,  lower  its  exchange- 
able value,  the  revenue  of  the  consumers  is  benefited;  for  to  them 
every  saving  of  expenditure  is  so  much  gain. 

This  new  direction  of  revenue,  however  advantageous  to  the  com- 
munity at  large,  as  we  shall  presently  see,  is  always  attended  with 
some  painful  circumstances.  For  the  distress  of  a  capitalist,  when 
his  funds  are  unprofitably  engaged  or  in  a  state  of  inactivity,  is 
nothing  to  that  of  an  industrious  population  deprived  of  the  means 
of  subsistence. 

Inasmuch  as  machinery  produces  that  evil,  it  is  clearly  objection- 
able. But  there  are  circumstances  that  commonly  accompany  its 
introduction,  and  wonderfully  reduce  the  mischiefs,  while  at  the 
same  time  they  give  full  play  to  the  benefits  of  the  innovation.  For, 

1.  New  machines  are  slowly  constructed,  and  still  more  slowly 
brought  into  use ;  so  as  to  give  time  for  those  who  are  interested,  to 
take  their  measures,  and  for  the  public  administration  to  provide  a 
remedy.* 

2.  Machines  cannot  be  constructed  without  considerable  labour, 
which  gives  occupation  to  the  hands  they  throw  out  of  employ.   For 
.nstance,  the  supply  of  a  city  with  water  by  conduits  gives  increased 
occupation  to  carpenters,  masons,  smiths,  paviours,  &c.  in  the  con- 
struction of  the  works,  the  laying  down  the  main  and  branch  pipes, 
&c.  &c. 

3.  The   condition    of   consumers   at    large,   and   consequently, 
amongst  them,  of  the  class  of  labourers  affected  by  the  innovation, 
is  improved  by  the  reduced  value  of  the  product  that  class  was 
occupied  upon. 

Besides,  it  would  be  vain  to  attempt  to  avoid  the  transient  evil, 
consequential  upon  the  invention  of  a  new  machine,  by  prohibiting 
its  employment.  If  beneficial,  it  is  or  will  be  introduced  some- 
where or  other ;  its  products  will  be  cheaper  than  those  of  labour 
conducted  on  the  old  principle;  and  sooner  or  later  that  cheapness 
will  run  away  with  the  consumption  and  demand.  Had  the  cotton 
spinners  on  the  old  principle,  who  destroyed  the  spinning-jennies  on 
their  introduction  intq  Normandy,  in  1789,  succeeded  in  their  object 
France  must  have  abandoned  the  cotton  manufacture;  every  body 
would  have  bought  the  foreign  article,  or  used  some  substitute ;  and 
the  spinners  of  Normandy,  who,  in  the  end,  most  of  them,  found 
employment  in  the  new  establishments,  would  have  been  yet  worse 
off  for  employment. 

*  Without  having  recourse  to  local  or  temporary  restrictions  on  the  use  of  new 
methods  or  machinery,  which  are  invasions  of  the  property  of  the  inventors  or 
fabricators,  a  benevolent  administration  can  make  provision  for  the  employment 
of  supplanted  or  inactive  labour  in  the  construction  of  works  of  public  utility  at 
the  public  expense,  as  of  canals,  roads,  churches,  or  the  like ;  in  extended  colo- 
nization; in  the  transfer  of  population  from  one  spot,  to  another.  Employment 
is  the  more  readily  found  for  the  hands  thrown  out  of  work  by  machinery 
because  thev  are  commonly  already  inured  to  labour. 


88  ON  PRODUCTION.  BOOK  I. 

So  much  for  the  immediate  effect  of  the  introduction  of  machinery. 
The  ultimate  effect  is  wholly  in  its  favour. 

Indeed  if  by  its  means  man  makes  a  conquest  of  nature,  and  com- 
pels the  powers  of  nature  and  the  properties  of  natural  agents  to 
work  for  his  use  and  advantage,  the  gain  is  too  obvious  to  need  illus- 
tration. There  must  always  be  an  increase  of  product,  or  a  dimi- 
nution in  the  cost  of  production.  If  the  sale-price  of  a  product  do 
not  fall,  the  acquisition  redounds  to  the  profit  of  the  producer;  and 
that  without  any  loss  to  the  consumer.  If  it  do  fall,  the  consumer  is 
benefited  to  the  whole  amount  of  the  fall,  without  any  loss  to  the 
producer. 

The  multiplication  of  a  product  commonly  reduces  its  price,  that 
reduction  extends  its  consumption;  and  so  its  production,  though 
become  more  rapid,  nevertheless  gives  employment  to  more  hands 
than  before.  It  is  beyond  question,  that  the  manufacture  of  cot 
ton  now  occupies  more  hands  in  England,  France,  and  Germany, 
than  it  did  before  the  introduction  of  the  machinery  that  has  abridg- 
ed and  perfected  this  branch  of  manufacture  in  so  remarkable  a 
degree. 

Another  striking  example  of  a  similar  effect  is  presented  by  the 
machine  used  to  multiply  with  rapidity  the  copies  of  a  literary  per- 
formance,— I  mean  the  printing  press. 

Setting  aside  all  consideration  of  the  prodigious  impulse  given  by 
the  art  of  printing  to  the  progress  of  human  knowledge  and  civiliza- 
tion, I  will  speak  of  it  merely  as  a  manufacture,  and  in  an  economi 
cal  point  of  view.  When  printing  was  first  brought  into  use,  a 
multitude  of  copyists  were  of  course  immediately  deprived  of  occu- 
pation ;  for  it  may  be  fairly  reckoned,  that  one  journeyman  printer 
does  the  business  of  two  hundred  copyists.  We  may,  therefore, 
conclude,  that  199  out  of  200  were  thrown  out  of  work.  What 
followed  ?  Why,  in  a  little  time,  the  greater  facility  of  reading 
printed  than  written  books,  the  low  price  to  which  books  fell,  the 
stimulus  this  invention  gave  to  authorship,  whether  devoted  to 
amusement  or  instruction,  the  combination,  in  short,  of  all  these 
causes,  operated  so  effectually  as  to  set  at  work,  in  a  very  little  time, 
more  journeymen  printers  than  there  were  formerly  copyists.  And 
if  we  could  now  calculate  with  precision,  besides  the  number  of 
journeymen  printers,  the  total  number  of  other  industrious  people 
that  the  press  finds  occupation  for,  whether  as  type-founders  and 
moulders,  paper-makers,  carriers,  compositors,  bookbinders,  book- 
sellers, and  the  like,  we  should  probably  find,  that  the  number  of 
persons  occupied  in  the  manufacture  of  books  is  now  100  times  what 
it  \vas  before  the  art  of  printing  was  invented. 

It  may  be  allowable  to  add,  that  viewing  human  labour  and  ma- 
chinery in  the  aggregate,  in  the  supposition  of  the  extreme  case,  viz. 
that  machinery  should  be  brought  to  supersede  human  labour  alto 
gether,  yet  the  numbers  of  mankind  would  not  be  thinned ;  for  the 
sum  total  of  products  would  be  the  same,  and  there  would  probabiy 
be  less  suffering  to  the  poorer  and  labouring  classes  to  be  apprehend- 


CHAP.  VII.  ON  PRODUCTION.  89 

ed ;  for  in  that  case  the  momentary  fluctuations,  that  distress  the 
different  branches  of  industry,  would  principally  affect  machinery, 
•which,  and  not  human  labour,  would  be  paralyzed  ;  and  machinery 
cannot  die  of  hunger  ;  it  can  only  cease  to  yield  profit  to  its  employ- 
ers, who  are  generally  farther  removed  from  want  than  mere 
labourers. 

But  however  great  may  be  the  advantages,  which  the  adventur- 
ers in  industry,  and  even  the  operative  classes,  may  ultimately 
derive  from  the  employment  of  improved  machinery,  the  great  gain 
accrues  to  the  consumers,  which  is  always  the  most  important  class, 
because  it  is  the  most  numerous;  because  it  comprehends  every 
description  of  producers  whatever;  and  because  the  welfare  of  this 
class,  wherein  all  others  are  comprised,  constitutes  the  general  well- 
being  and  prosperity  of  a  nation.*  I  repeat,  that  it  is  the  consumers 
who  draw  the  greatest  benefit  from  machinery;  for  though  the 
invei/or  may  indeed  for  some  years  enjoy  the  exclusive  advantage 
of  his  invention,  which  it  is  highly  just  and  proper  he  should,  yet 
there  is  no  instance  of  a  secret  remaining  long  undivulged.  Nothing 
can  long  escape  publicity,  least  of  all  what  people  have  a  personal 
interest  in  discovering,  especially  if  the  secret  be  necessarily  con- 
fided to  the  discretion  of  a  number  of  persons  employed  in  construct- 
ing or  in  working  the  machine.  The  product  is  thenceforward  cheap- 
ened by  competition  to  the  full  extent  of  the  saving  in  the  cost  of 
production ;  and  thenceforward  begins  the  full  advantage  to  the  con- 
sumer.— The  grinding  of  corn  is  probably  not  more  profitable  to  the 
miller  now  than  formerly;  but  it  costs  infinitely  less  to  the  con- 
sumer. 

Nor  is  cheapness  the  sole  benefit  that  the  consumer  reaps  from  the 
introduction  of  more  expeditious  processes:  he  generally  gains  in 
addition  the  greater  perfection  of  the  product.  Painters  could  un- 
doubtedly execute  with  the  brush  or  pencil  the  designs  that  ornament 
our  printed  calicoes  and  furniture  papers,  but  the  copperplates  and 
rollers  employed  for  that  purpose  give  a  regularity  of  pattern,  ana 
uniformity  of  colour,  which  the  most  skilful  artist  could  never  equal. 

The  close  pursuit  of  this  inquiry  through  all  the  arts  of  industry 
would  show,  that  the  advantage  of  machinery  is  not  limited  to  the 
bare  substitution  of  it  for  human  labour,  but  that,  in  fact,  it  gives  a 
positive  new  product,  inasmuch  as  it  gives  a  degree  of  perfection 
before  unknown.  The  flatting-mill  and  the  die  execute  products, 
that  the  utmost  skill  and  attention  of  the  human  hand  could  never 
accomplish. 

In  fine,  machinery  does  still  more;  it  multiplies  products  with 
which  it  has  no  immediate  connexion.  Without  taking  the  trouble 
to  reflect,  one  perhaps  would  scarcely  imagine  that  the  plough,  the 
harrow,  and  other  similar  machines,  whose  origin  is  lost  in  the  night 

*  Paradoxical  as  it  may  appear,  it  is  nevertheless  true,  that  the  labouring  class 
is  of  all  others  the  most  interested  in  promoting  the  economy  of  human  labour ; 
for  that  is  the  class  which  benefits  the  most  by  the  general  cheapness,  and  suf 
fers  most  from  the  general  dearness  of  commodities. 
8*  M 


00  ON  PRODUCTION.  BOOK  L 

of  ages,  have  powerfully  contributed  to  procure  for  mankind,  besides 
the  absolute  necessaries  of  life,  a  vast  number  of  the  superfluities 
they  now  enjoy,  whereof  they  would  otherwise  never  have  had  any 
conception.  Yet,  if  the  different  dressings  the  soil  requires  could 
be  no  otherwise  given,  than  by  the  spade,  the  hoe,  and  other  such 
simple  and  tardy  expedients,  if  we  were  unable  to  make  available  in 
agricultural  production  those  domestic  animals,  that,  in  the  eye  of 
political  economy,  are  but  a  kind  of  machines,  it  is  most  likely  thit 
the  whole  mass  of  human  labour,  now  applicable  to  the  arts  of  indns- 
try,  would  be  occupied  in  raising  the  bare  necessary  subsistence  of 
the  actual  population.  Thus,  the  ploUgh  has  been  instrumental  in 
releasing  a  number  of  hands  for  the  prosecution  of  the  arts,  even  of 
the  most  frivolous  kind ;  and  what  is  of  more  importance,  for  the 
cultivation  of  the  intellectual  faculties. 

The  ancients  were  unacquainted  with  water  or  wind-mills.  In 
their  time,  the  wheat  their  bread  was  made  of,  was  pounded  by  the 
labour  of  the  hand :  so  that  perhaps  no  less  than  twenty  individuals 
were  occupied  in  pounding  as  much  wheat  as  one  mill  can  grind.* 
Now  a  single  miller,  or  two  at  the  most,  is  enough  to  feed  and 
superintend  a  mill.  By  the  aid,  then,  of  this  ingenious  piece  of 
mechanism,  two  persons  are  as  productive  as  twenty  were  in  the  days 
of  Caesar.  Wherefore,  in  every  one  of  our  mills,  we  make  the  wind, 
or  a  current  of  water,  do  the  work  of  eighteen  persons ;  which 
eighteen  extra  persons  are  just  as  well  provided  with  subsistence ; 
for  the  mill  has  in  no  respect  diminished  the  general  produce  of  the 
community:  and  whose  exertions  may  be  directed  to  the  creation  of 
new  products,  to  be  given  by  them  in  exchange  for  the  produce  of 
the  mill;  thereby  augmenting  the  general  wealth  of  the  community  .f 


CHAPTER  VIII. 

OF  THE  ADVANTAGES   AND  DISADVANTAGES  RESULTING   FROM   DIVISION  OP 
LABOUR,  AND  OP  THE  EXTENT  TO  WHICH  IT  MAY  BE  CARRIED. 

WE  have  already  observed  that  the  several  operations,  the  com- 
bination of  which  forms  but  one  branch  of  industry,  are  not  in  gene- 
ral undertaken  or  performed  by  the  same  person ;  for  they  commonlv 

*  Homer  tells  us,  in  the  Odyssey,  b.  xx.,  that  twelve  women  were  daily  em- 
ployed in  grinding  corn  for  the  family  consumption  of  Ulysses,  whose  establish- 
ment is  not  represented  as  larger  than  that  of  a  private  gentleman  of  fortune  of 
modern  days. 

•\  Since  the  publication  of  the  third  edition  of  this  work,  M.  de  Sismondi  has 
published  his  Nmiveaux  Principes  <T 'Economic  Politique.  This  valuable  writer 
teems  to  have  been  impressed  with  an  exaggerated  notion  of  the  transient  evils 


CHAP.  VIII.  ON  PRODUCTION.  91 

require  different  kinds  of  talent ;  and  the  labour  requisite  to  each  is 
enough  to  take  up  a  man's  whole  time  and  attention.  Nay,  in  some 
instances,  a  single  one  of  these  operations  is  split  again  into  smaller 
subdivisions,  each  of  them  sufficient  for  one  person's  exclusive  occu- 
pation. ^ 

Thus,  the  study  of  nature  is  shared  amongst  the  chemist,  the 
botanist,  the  astronomer,  and  many  other  classes  of  students  in 
philosophy. 

Thus,  too,  in  the  application  of  human  knowledge  to  the  satisfac- 
tion of  human  wants,  in  manufacturing  industry,  for  instance,  we 
find  different  classes  of  manufacturers  employed  exclusively  in  the 
fabric  of  woollens,  pottery,  furniture,  cottons,  &c.  &c. 

Finally,  in  the  executive  part  of  each  of  the  three  branches  of  in- 
dustry, there  are  often  as  many  different  classes  of  workmen  as  there 
are  different  kinds  of  work.  To  make  the  cloth  of  a  coat,  there 
must  have  been  set  to  work  the  several  classes  of  spinners,  weavers, 
dressers,  shearers,  dyers,  and  many  other  classes  of  labourers,  each 
of  whom  is  constantly  and  exclusively  occupied  upon  one  operation. 

The  celebrated  Adam  Smith  was  the  first  to  point  out  the  im- 
mense increase  of  production,  and  the  superior  perfection  of  products 
referable  to  this  division  of  labour.*  He  has  cited  among  other 

and  a  faint  one  of  the  permanent  benefits  of  machinery,  and  to  be  utterly  unao 
quainted  with  those  principles  of  the  science,  which  place  those  benefits  beyond 
controversy,  (a) 

*  Beccaria,  in  a  public  course  of  lectures  on  political  economy,  delivered  at 
Milan  in  the  year  1769,  and  before  the  publication  of  Smith's  work,  had  remark- 
ed the  favourable  influence  of  the  division  of  labour  upon  the  multiplication  of 
products.  These  are  his  words :  "  Ciascuno  prova  colF  esperienza,  che,  applican- 
do  la  mono  e  Vingegne  sempre  allo  stesso  genere  di  opere  e  di  prodotti,  egli  piu 
facilli,  piu  abondanti  e  migliori  ne  travo  i  resultati,  di  quello,  che  se  ciascuno 
isolatamente  le  cose  tutte  a  se  necessarie  soltanto  facesse  :  onde  altri  pascono 
le  pecore,  altri  ne  cardano  le  lane,  altri  le  tessonoe :  chi  coltiva  biade,  chi  nefa 
il  pane :  chi  veste,  chi  fabrica  agli  agricoltorie  la  voranti  ;  crescendo  e  conca- 
tenandosi  le  arti,  e  dividendosi  in  tal  maniera,  per  la  commune  e  privata  ufilita 
gli  nomini  in  varie  classi  e  condizioni."  "  We  all  know,  b"y  personal  experi- 
ence, that,  by  the  continual  application  of  the  corporeal  and  intellectual  faculties 
to  one  peculiar  kind  of  work  or  product,  we  can  obtain  the  product  with  more 
ease,  and  in  greater  abundance  and  perfection,  than  if  each  were  to  depend  upon 
his  own  exertions  for  all  the  objects  of  his  wants.  For  this  reason,  one  man  feeds 
sheep,  a  second  cards  the  wool,  and  a  third  weaves  it :  one  man  cultivates  wheat, 
another  makes  bread,  another  makes  clothing  or  lodging  for  the  cultivators  ant* 
mechanics :  this  multiplication  and  concatenation  of  the  arts,  and  division  of 
mankind  into  a  variety  of  classes  and  conditions,  operating  to  promote  both  pub- 
lic and  private  welfare." 

However,  I  have  given  Smith  the  credit  of  originality  in  his  ideas  of  the  di- 
vision of  labour;  first,  because,  in  all  probability,  he  had  published  his  opinions 
from  his  chair  of  professor  of  philosophy  at  Glasgow  before  Beccaria,  as  it  is 

(a)  Our  author,  in  his  recent  argument  with  Malthus,  upon  the  subject  of  the 
excess  of  manufacturing  power  and  produce,  appears  to  me  to  have  completely 
vindicated  his  own  positions  against  the  attacks  of  Sismondi  and  Malthus  ;  and 
to  have  exposed  the  fallacy  of  the  appalling  doctrine,  that  the  powers  of  human 
industry  can  ever  be  too  great  and  too  productive. —  Vide  Letters  a  M.  Malthta 


«2  ON  PRODUCTION.  BOOK  I. 

examples,  the  manufacture  of  pins.  The  workmen  occupied  in  this 
manufacture  execute  each  but  one  part  of  a  pin.  One  draws  the 
wire,  another  cuts  it,  a  third  sharpens  the  points.  The  head  of  a 
pin  alone  requires  two  or  three  distinct  operations,  each  performed 
by  a  different  individual.  By  means  of  this  division,  afj/fl-appointed 
establishment,  with  but  ten  labourers  employed,  could  make  48,000 
pins  per  day,  by  Smith's  account.  Whereas,  if  each  person  were 
obliged  to  finish  off  the  pins  one  by  one,  going  through  every  opera- 
tion successively  from  first  to  last,  each  would  probably  make  but 
20  per  day,  and  the  ten  workmen  would  produce  in  the  whole  but 
200,  in  lieu  of  48,000. 

Smith  attributes  this  prodigious  difference  to  three  causes: 
1  The  improved  dexterity,  corporeal  and  intellectual,  acquirer 
by  frequent  repetition  of  one  simple  operation.  In  some  fabrics  the 
rapidity  with  which  some  of  the  operations  are  performed  exceeds 
what  the  human  hand  could,  by  those  who  had  never  seen  them,  be 
supposed  capable  of  acquiring. 

2.  The  saving  of  the  time  which  is  commonly  lost  in  passing  from 
one  species  of  work  to  another,  and  in  the  change  of  place,  position, 
and  tools.     The  attention,  which  is  always  slowly  transferred,  has 
no  occasion  to  transport  itself  and  settle  upon  a  new  object. 

3.  The  invention  of  a  great  number  of  machines,  which  facilitate 
and  abridge  labour  in  all  its  departments.     For  the  division  of  labour 
naturally  limits  each  operation  to  an  extremely  simple  task,  and  one 
that  is  incessantly  repeated;  which  is  precisely  what  machinery 
may  most  easily  be  made  to  perform. 

Besides,  men  soonest  discover  the  methods  of  arriving  at  a  parti- 
cular end,  when  the  end  is  approximate,  and  their  attention  exclu- 

well  known  he  did  the  principles  that  form  the  ground-work  of  his  book ;  but 
chiefly  because  he  has  the  merit  of  having  deduced  from  them  the  most  import- 
ant conclusions.  (1) 

(1)  [All  the  fundamental  doctrines  contained  in  the  Inquiry  into  the  Wealth 
of  Nations,  were  comprehended  in  Dr.  Smith's  course  of  political  lectures,  deliv- 
ered at  Glasgow  as  early  as  the  year  1752 ;  "  at  a  period  surely,"  says  DUGALD 
STEWART,  "  when  there  existed  no  French  (and  he  might  have  added,  nor 
Italian)  performance  on  the  subject,  that  could  be  of  much  use  to  him  in  guiding 
his  researches."  A  short  manuscript,  drawn  up  by  Dr.  Smith  in  the  year  1755, 
fully  establishes  his  exclusive  claim  to  the  most  important  opinions  detailed  in 
his  treatise  on  the  Wealth  of  Nations,  which  did  not  appear  until  the  beginning 
of  the  year  1776.  "  A  great  part  of  the  opinions  enumerated  in  this  paper,  (he 
observes,)  is  treated  of  at  length  in  some  lectures  which  I  have  still  by  me 
(1755,)  and  which  were  written  in  the  hand  of  a  clerk  who  left  my  service  six 
years  ago.  They  have  all  of  them  been  the  constant  subject  of  my  lectures, 
since  I  first  taught  Mr.  Craigie's  class,  the  first  winter  I  spent  in  Glasgow, 
down  to  this  day,  without  any  considerable  variation. — They  had  all  of  them 
been  the  subject  of  lectures  which  I  read  in  Edinburgh  the  winter  before  I  left  it, 
and  I  can  adduce  innumerable  witnesses,  both  from  that  place  and  from  this, 
who  will  ascertain  them  sufficiently  to  be  mine."  Vide  Mr.  Stewart's  Account 
of  the  Life  and  Writings  of  Adam  Smith,  LL.  D.  read  before  the  Royal  Society 
of  Edinburgh,  January  21  and  March  18,  1793.] 

AMERICAN  EDITOR. 


CHAP.  VIII.  ON  PRODUCTION.  93 

sively  directed  to  it.  Discoveries,  even  in  the  walk  of  philosophy, 
are  for  the  most  part  referable,  in  their  origin,  to  the  subdivision  of 
labour ;  because  it  is  this  subdivision  that  enables  men  to  devote 
themselves  to  the  exclusive  pursuit  of  one  branch  of  knowledge; 
which  exclusive  devotion  has  wonderfully  favoured  their  advance- 
ment.* 

Thus  the  knowledge  or  theory  necessary  to  the  advancement  of 
commercial  industry  for  instance,  attains  a  far  greater  degree  of  per- 
fection, when  different  persons  engage  in  the  several  studies ;  one  of 
geography,  with  the  view  of  ascertaining  the  respective  position  and 
products  of  different  countries ;  another  of  politics,  with  a  view  to 
inform  himself  of  their  national  laws  and  manners,  and  the  advan- 
tages and  disadvantages  of  commercial  intercourse  with  them ;  a  third 
of  geometry  and  mechanics,  by  way  of  determining  the  preferable 
form  of  the  ships,  carriages,  and  machinery  of  all  kinds,  that  must 
be  employed ;  a  fourth  of  astronomy  and  natural  philosophy,  for  the 
purposes  of  navigation,  &c.  &c. 

Thus,  too,  the  application  of  knowledge  in  the  same  department 
of  commercial  industry  will  obviously  arrive  at  a  higher  degree  of 
perfection,  when  divided  amongst  the  several  branches  of  internal, 
Mediterranean,  East  and  West  Indian,  American,  wholesale  and 
retail,  &c.  &c. 

Moreover,  such  a  division  is  no  obstacle  to  the  combination  of 
operations  not  altogether  incompatible,  more  especially  if  they  aid 
and  assist  each  other.  There  is  no  occasion  for  two  different  mer- 
chants to  conduct,  one  the  trade  of  import  for  home  consumption, 
and  the  other  the  trade  of  export  of  home  products ;  because  these 
operations,  far  from  clashing,  mutually  facilitate  and  assist  each 
other,  (a) 

The  division  of  labour  cheapens  products,  by  raising  a  greater 
quantity  at  the  same  or  less  charge  of  production.  Competition  soon 
obliges  the  producer  to  lower  the  price  to  the  whole  amount  of  the 
saving  effected ;  so  that  he  derives  much  less  benefit  than  the  consu- 
mer ;  and  every  obstacle  the  latter  throws  in  the  way  of  that  division 
is  an  injury  to  himself. 

*  But  though  many  important  discoveries  in  the  arts  have  originated  in  divi- 
sion of  labour,  we  must  not  refer  to  that  source  the  actual  products  that  have  re- 
sulted, and  will  to  eternity  result,  from  those  discoveries.  The  increased  product 
must  flow  from  the  productive  power  of  natural  agents,  no  matter  what  may  have 
been  the  occasion  of  our  first  becoming  acquainted  with  the  means  of  employing 
those  agents.  Vide  supra,  Chap.  IV. 

(a)  The  combination  of  operations  which  at  first  sight  appears  to  be  distinct, 
is  far  more  practicable  in  what  our  author  calls  the  branch  of  application,  than  in 
either  the  theoretical  or  the  executive  branch.  A  general  merchant,  by  means  of 
clerks  and  brokers,  will  combine  a  vast  variety  of  different  commercial  opera- 
tions, and  yet  prosper.  Why?  Because  his  own  peculiar  task  is  that  of  super- 
intendence of  commercial  dealings ;  which  superintendence  may  be  extended 
over  a  greater  surface  of  dealing  without  incongruity,  being  on  a  closer  in 
spection,  but  a  repetition  r>f  the  same  operation. 


94  ON  PRODUCTION.  BOOK  I 

Should  a  tailor  try  to  make  his  own  shoes  as  well  as  his  coat,  he 
would  infallibly  ruin  himself.*  We  see  every  day  people  acting  as 
their  own  merchants,  to  avoid  paying  a  regular  trader  the  ordinary 
profit  of  his  business ;  to  use  their  own  expression,  with  the  view  of 
pocketing  that  profit  themselves.  But  this  is  an  erroneous  calcula- 
tion ;  for  this  division  of  labour  enables  the  regular  dealer  to  execute 
the  business  for  them  much  cheaper  than  they  can  do  it  themselves. 
Let  them  reckon  up  the  trouble  it  costs  them,  the  loss  of  time,  the 
money  thrown  away  in  extra  charges,  which  is  always  proportion- 
ally more  in  small  than  in  large  operations,  and  see  if  all  these  to- 
gether do  not  amount  to  more  than  the  two  or  three  per  cent,  that 
might  be  saved  on  every-  paltry  item  of  consumption ;  even  suppo- 
sing them  not  to  be  deprived  of  what  little  advantage  they  might 
expect,  by  the  avarice  of  the  cultivator  or  manufacturer  they  would 
have  to  deal  directly  with,  who  will  of  course  impose,  if  he  can, 
upon  their  inexperience. 

I"  is  no  advantage,  even  to  the  cultivator  or  manufacturer  himself, 
except  under  very  particular  circumstances,  to  intrude  upon  the 
province  of  the  merchant,  and  endeavonr  to  deal  directly  with  the 
consumer  without  his  intervention.  He  would  only  divert  his  at- 
tention from  his  ordinary  occupation,  and  lose  time  that  might  be 
far  better  employed  in  his  own  peculiar  line ;  besides  being  under 
the  necessity  of  keeping  up  an  establishment  of  people,  horses,  car- 
riages, &c.  the  expenses  of  which  would  far  exceed  the  merchant's 
profit,  reduced  as  it  always  must  be  by  competition. 

The  advantages  accruing  from  division  of  labour  can  be  enjoyed 
in  respect  of  particular  kinds  of  products  only;  and  not  in  them,  un- 
til their  consumption  has  exceeded  a  certain  point  of  extension.  Ten 
workmen  can  make  48,000  pins  in  a  day ;  but  would  hardly  do  so, 
unless  where  there  was  a  daily  consumption  of  pins  to  that  amount ; 
for,  to  arrive  at  this  degree  of  division  of  labour,  one  workman  must 
be  wholly  and  exclusively  occupied  in  sharpening  the  points,  while 
the  rest  are  severally  engaged,  each  in  a  different  part  of  the  process. 
If  there  be  a  daily  demand  for  no  more  than  24,000,  he  must  needs 
lose  half  his  day's  work,  or  change  his  occupation*  in  which  case, 
the  division  of  labour  will  be  less  extensive  and  complete. 

For  this  reason,  divisions  of  labour  cannot  be  carried  to  the  extreme 
limit,  except  in  products  capable  of  distant  transport  and  the  conse- 
quent increase  of  consumption;  or  where  manufacture  is  carried  on 
amidst  a  dense  population,  offering  an  extensive  local  consumption. 
For  the  same  reason,  too,  many  kinds  of  work,  the  products  of  which 
are  destined  to  instantaneous  consumption,  are  executed  by  the  same 
individual,  in  places  whertf  the  population  is  limited.  In  a  small 
town  or  village,  the  same  person  is  often  barber,  surgeon,  doctor, 

*  The  low  price  of  sugar  in  China  is  probably  occasioned,  in  part,  by  the  cir- 
cumstance of  the  grower  leaving  to  a  separate  class  the  extraction  of  the  sugar 
from  the  cane.  This  operation  is  performed  by  itinerant  sugar  pressers,  who 
go  from  house  to  house,  offering  their  services,  and  provided  with  an  extremely 
simple  apparatus  Vide  Macartney's  Embassy,  vol.  iv.  p.  198. 


CHAP.  VIII.  ON  PRODUCTION.  95 

and  apothecary ;  while  in  a  populous  city,  and  there  only,  these  are 
not  merely  separate  and  distinct  occupations,  but  some  of  them  are 
again  subdivided  into  several  branches;  that  of  the  surgeon,  for  in- 
stance, is  split  into  the  several  occupations  of  dentist,  oculist,  ac- 
coucher,  &c. ;  each  of  which  practitioners,  by  confining  his  practice 
to  a  single  branch  of  this  extensive  art,  acquires  a  degree  of  skill, 
which,  but  for  this  division,  he  could  never  attain. 

The  same  circumstance  applies  equally  to  commercial  industry. 
Take  the  village  grocer ;  the  consumption  of  his  groceries  is  so  lim- 
ited, as  to  oblige  him  to  be  at  the  same  time  haberdasher,  stationer, 
innkeeper,  and  who  knows  what,  perhaps  even  news-writer  and  pub- 
lisher ;  whereas  in  large  cities,  not  only  grocery  at  large,  but  even 
the  sale  of  a  single  article  of  grocery,  is  a  great  commercial  concern. 
At  Paris,  London,  and  Amsterdam,  there  are  shops,  where  nothing 
else  is  sold  but  the  single  article  tea,  oil  or  vinegar;  and  it  is  natural 
to  suppose  that  such  shops  have  a  much  better  assortment  of  the  sin- 
gle article,  than  those  dealing  in  many  different  commodities  at  once. 
Thus,  in  a  rich  and  populous  country,  the  carrier,  the  wholesale,  the 
intermediate,  and  the  retail  dealer  conduct  each  a  separate  branch  of 
commercial  industry,  and  conduct  it  with  greater  perfection  as  well 
as  greater  economy.  Yet  they  all  benefit  by  this  economy ;  and  that 
they  do  so,  if  the  explanations  already  given  are  not  convincing,  ex- 
perience bears  irrefragable  testimony ;  for  consumers  always  buy 
cheapest  where  commercial  industry  is  the  most  subdivided.  Ceteris 
paribus,  a  commodity  brought  from  the  same  distance  is  sold  cheap- 
er at  a  large  town  or  fair,  than  in  a  village  or  hamlet. 

The  limited  consumption  of  hamlets  and  villages,  besides  obliging 
dealers  to  combine  many  elsewhere  distinct  occupations,  prevents 
many  articles  from  finding  a  regular  sale  at  all  seasons.  Some  are 
not  presented  for  sale  at  all,  except  on  market  or  fair  days ;  on  such 
days  the  whole  week's  or  perhaps  year's  consumption  is  laid  in. 
On  all  other  days,  the  dealer  either  travels  elsewhere  with  his  wares, 
or  finds  some  other  kind  of  occupation.  In  a  very  rich  and  very 
populous  district,  the  consumption  is  so  great,  as  to  make  the  sale  of 
one  article  only,  quite  as  much  as  a  trader  can  manage,  though  he 
devote  every  day  in  the  week  to  the  business.  Fairs  and  markets 
are  expedients  of  an  early  stage  of  national  prosperity;  the  trade  by 
caravans  is  a  still  earlier  stage  of  international  commerce;  but  even 
these  expedients  are  far  better  than  none  at  all.* 

*  The  country  markets  of  France  not  only  exhibit  extreme  inertness  in  parti- 
cular channels  of  consumption ;  but  a  very  cursory  observation  is  sufficient  to 
show,  that  the  sale  of  products  in  them  is  very  limited,  and  the  quality  of  what 
are  sold  very  inferior.  Besides  the  local  products  of  the  district,  one  sees  nothing 
there,  except  a  few  tools,  woollens,  linens,  and  cottons  of  the  most  inferior 
quality.  In  a  more  advanced  stage  of  prosperity,  one  would  find  some  few  objects 
of  gratification  of  wants  peculiar  to  a  more  refined  state  of  existence:  some  arti- 
cles of  furniture  combining  convenience  and  elegance  of  form ;  woollens  of  somfl 
variety  or'  fineness  and  pattern ;  articles  of  food  of  a  more  expensive  kind,  whe- 


06  ON  PRODUCTION.  BOOK  I. 

From  the  necessity  of  the  existence  of  a  very  extended  consump- 
tion, before  division  of  labour  can  be  carried  to  its  extreme  point,  it 
follows,  that  such  division  can  never  be  introduced  in  the  manufac- 
ture of  products,  which,  from  their  high  price,  are  placed  within  the 
reach  of  few  purchasers.  In  jewellery,  especially  of  the  better  kinds, 
.t  is  practised  in  a  very  limited  degree ;  and  such  division  being,  as 
we  have  seen,  one  cause  of  the  indention  and  application  of  ingenious 
processes,  it  is  not  surprising  that  such  processes  are  least  often  met 
with  in  the  preparation  of  products  of  highly  finished  workmanship. 
In  visiting  the  workshop  of  a  lapidary,  one  is  often  dazzled  with  the 
costliness  of  the  materials,  and  the  skill  and  patience  of  the  work- 
man ;  but  it  is  only  in  the  grand  manufactories  of  articles  of  univer- 
sal consumption,  that  one  is  astonished  with  the  display  of  ingenuity 
employed  to  give  additional  expedition  and  perfection  to  the  pro- 
duct. In  looking  at  an  article  of  jewellery,  it  is  easy  to  form  an  idea 
of  the  tools  and  processes,  by  means  of  which  it  has  been  executed; 
whereas  few  people,  on  viewing  a  common  stay-lace,  would  suppose 
it  had  been  made  by  a  horse  or  a  current  of  water,  which  is  actually 
the  case. 

Of  the  three  branches  of  industry,  agriculture  is  the  one  that  admits 
division  of  labour  in  the  least  degree.  It  is  impossible  to  collect  any 
great  number  of  cultivators  on  the  same  spot,  to  use  their  joint  exer- 
tions in  the  raising  of  one  and  the  same  product.  The  soil  they 
work  upon  is  extended  over  the  whole  surface  of  the  globe,  and 
obliges  them  to  work  at  considerable  distance  frorn  each  other.  Be- 
sides, agriculture  does  not  allow  of  one  person  being  continually 
employed  in  the  same  operation.  One  man  cannot  be  all  the  yeai 
ploughing  or  digging,  any  more  than  another  can  find  constant  occu- 
pation in  gathering  in  the  crop.  Moreover,  it  is  very  rarely  that  the 
whole  of  one's  land  can  be  devoted  to  the  same  kind  of  cultivation, 
or  that  the  same  kind  of  cultivation  can  be  continued  on  the  same 
spot  for  many  successive  years.  The  land  would  be  exhausted ;  and, 
supposing  the  cultivation  of  the  whole  property  to  be  uniform,  yet 
even  then,  the  preparing  and  dressing  of  the  whole  ground,  and  the 
getting  in  of  the  whole  of  the  crops,  would  come  on  at  the  same  time, 
and  the  labourers  be  unoccupied  at  other  periods  of  the  year.* 

ther  on  account  of  their  preparation  or  the  distance  they  may  have  been  brought 
from ;  a  few  works  of  instruction  or  tasteful  amusement ;  a  few  books  besides 
mere  almanacs  and  prayer-books.  In  a  still  more  advanced  stage,  the  consump- 
tion of  all  these  things  would  be  constant  and  extensive  enough  to  support  regu- 
lar and  well-stocked  shops  in  all  these  different  lines.  Of  this  degree  of  wealth 
examples  are  to  be  found  in  Europe,  particularly  in  parts  of  England,  Holland, 
and  Germany. 

*It  is  not  common  to  meet  with  such  large  concerns  in  agriculture,  as  in  the 
branches  of  commerce  and  manufacture.  A  fanner  or  proprietor  seldom  under- 
takes more  than  four  or  five  hundred  acres;  and  his  concern,  in  point  of  capital 
and  amount  of  produce,  does  not  exceed  that  of  a  middling  tradesman,  or  manu- 
facturer. This  difference  is  attributable  to  many  concurrent  causes;  chiefly  to 
!.!•»»  extensive  area  this  branch  of  industry  requires;  to  the  bulky  nature  of  the 


CHAP.  VIII.  ON  PRODUCTION.  97 

Moreover,  the  nature  of  his  occupation  and  of  agricultural  pro- 
ducts makes  it  highly  convenient  for  the  cultirator  to  raise  his  own 
vegetables,  fruit,  and  cattle,  and  even  to  manufacture  part  of  the 
tools  and  utensils  employed  in  his  house-keeping ;  though  in  the  other 
channels  of  industry,  these  items  of  consumption  give  exclusive 
occupation  to  a  number  of  distinct  classes. 

Where  concerns  of  industry  are  carried  on  in  manufactories,  in 
which  one  and  the  same  master  manufacturer  conducts  the  product 
through  all  its  stages,  he  can  never  establish  any  great  subdivision 
of  the  various  operations,  without  great  command  of  capital.  For 
such  division  requires  larger  advances  of  wages,  of  raw  materials, 
and  of  tools  and  implements.  Where  eighteen  workmen  manufacture 
but  twenty  pins  each  per  day,  that  is  to  say,  in  all  360  pins,  weigh- 
ing scarcely  an  ounce  of  metal,  the  daily  advance  of  an  ounce  of 
fresh  metal  is  enough  to  keep  them  in  regular  work.  But  if,  in  con- 
sequence of  division  of  labour,  these  same  eighteen  persons  can  be 
brought,  as  we  know  they  can,  to  produce  86,400  pins,  the  daily 
supply  of  raw  material  requisite  for  their  regular  employ  will  be 
240  ounces  weight  of  metal ;  consequently  a  much  more  considerable 
advance  will  be  called  for.  If  we  further  take  into  calculation,  that 
there  is  an  interval  of  probably  a  month  or  more,  from  the  purchase 
of  the  metal  by  the  manufacturer  to  the  period  of  his  reimbursement 
by  the  sale  of  his  pins,  we  shall  find  that  he  must  necessarily  have  at 
all  times  on  hand,  in  different  stages  of  progressive  manufacture,  30 
times  240  ounces  of  metal;  in  other  words,  the  portion  of  his  capital 
vested  in  raw  material  alone  will  amount  to  the  value  of  450  Ibs.  of 
metal.  In  addition  to  which,  it  must  be  observed,  that  the  division 
of  labour  cannot  be  effected  without  the  aid  of  various  implements 
and  machines,  that  form  themselves  an  important  item  of  capital. 
Thus,  in  poor  countries,  we  frequently  find  a  product  carried  through 
all  its  stages,  from  first  to  last,  by  one  and  the  same  workman,  from 
mere  want  of  the  capital  requisite  for  a  judicious  division  of  the  dif- 
ferent operations. 

We  must  not  however  suppose,  that,  to  effect  this  division  of 
labour,  it  is  necessary  the  capital  should  be  placed  all  in  the  hands 
of  a  single  adventurer,  or  the  business  conducted  all  within  the  walls 
of  one  grand  establishment  A  pair  of  boots  undergoes  a  variety  of 
processes,  whereof  all  are  not  executed  by  the  bootmaker  alone;  the 
grazier,  the  tanner,  the  currier,  all  others,  who  immediatel>  or  re- 
motely furnish  any  substance  or  tool  used  in  the  making  of  boots, 
contribute  to  the  raising  of  the  product;  and  though  there  is  a  very 
considerable  subdivision  of  labour  in  the  making  of  this  article,  lb? 


produce,  and  consequently  difficulty  of  collecting  it  at  one  point  from  the  distant 
parts  of  the  farm,  or  sending  it  to  very  remote  markets ;  to  the  nature  of  the 
business  itself,  which  is  not  susceptible  of  any  regular  and  uniform  system,  and 
requires  in  the  adventurer  a  succession  of  temporary  expedients  and  directions, 
suggested  hy  the  difference  of  culture,  of  manuring  and  dressings,  and  the  variety 
of  "each  labourer's  occupations,  according  to  the  seasons,  the  change  of  weather 
&c. 

9  N 


98  ON  PRODUCTION.  BOOK  L 

greater  part  of  the  joint  and  concurrent  producers  may  have  very 
little  command  of  capital. 

Having  detailed  the  advantages  of  the  subdivision  of  the  various 
occupations  of  industry,  and  the  extent  to  which  it  may  be  carried, 
the  view  of  the  subject  would  be  incomplete,  were  we  to  omit 
noticing,  on  the  other  hand,  the  inconveniences  that  inseparably 
attend  it. 

A  man,  whose  whole  life  is  devoted  to  the  execution  of  a  single 
operation,  will  most  assuredly  acquire  the  faculty  of  executing  it 
better  and  quicker  than  others ;  but  he  will,  at  the  same  time,  be 
rendered  less  fit  for  every  other  occupation,  corporeal  or  intellectual; 
his  other  faculties  will  be  gradually  blunted  or  extinguished ;  and  the 
man,  as  an  individual,  will  degenerate  in  consequence.  To  have 
never  done  any  thing  but  make  the  eighteenth  part  of  a  pin,  is  a 
sorry  account  for  a  human  being  to  give  of  his  existence.  JNor  is  it 
to  be  imagined  that  this  degeneracy  from  the  dignity  of  human 
nature  is  confined  to  the  labourer,  that  plies  all  his  life  at  the  file  or 
the  hammer;  men,  whose  professional  duties  call  into  play  the  finest 
faculties  of  the  mind,  are  subject  to  similar  degradation.  This  divi- 
sion of  occupations  has  given  rise  to  the  profession  of  attorneys, 
whose  sole  business  it  is  to  appear  in  the  courts  of  justice  instead  of 
the  principals,  and  to  follow  up  the  different  steps  of  the  process  on 
their  behalf.  These  legal  practitioners  are,  confessedly,  seldom 
deficient  in  technical  skill  and  ability ;  yet  it  is  not  uncommoi?  to 
meet  with  men,  even  of  eminence  in  this  profession,  wholly  igno- 
rant of  the  most  simple  processes  of  the  manufactures  they  every 
day  make  use  of;  who,  if  they  were  set  to  work  to  mend  the  simplest 
article  of  their  furniture,  would  scarcely  know  how  to  begin,  and 
could  probably  not  drive  a  nail,  without  exciting  the  risibility  of 
every  carpenter's  awkward  apprentice ;  and  if  placed  in  a  situation 
of  a  greater  emergency,  called  upon,  for  instance,  to  save  a  drowning 
friend,  or  to  rescue  a  fellow-townsman  from  a  hostile  attack,  would 
be  in  a  truly  distressing  perplexity ;  whereas  a  rough  peasant,  inha- 
biting a  semi-barbarous  district,  would  probably  extricate  himself 
from  a  similar  situation  with  honour. 

With  regard  to  the  labouring  class,  the  incapacity  for  any  other 
than  a  single  occupation,  renders  the  condition  of  mere  labourers 
more  hard  and  wearisome,  as  well  as  less  profitable.  They  have 
less  means  of  enforcing  their  own  rights  to  an  equitable  portion  of 
the  gross  value  of  the  product.  The  workman,  that  carries  about 
with  him  the  whole  implements  of  his  trade,  can  change  his  locality 
at  pleasure,  and  earn  his  subsistence  wherever  he  pleases :  in  the 
other  case,  he  is  a  mere  adjective,  without  individual  capacity,  inde- 
pendence, or  substantive  importance,  when  separated  from  his  fellow- 
labourers,  and  obliged  to  accept  whatever  terms  his  employer  thinks 
fit  to  impose 

On  the  whole,  we  may  conclude,  that  division  of  labour  is  a  skil- 
ful mode  of  employing  human  agency,  that  it  consequently  multiplies 
ihe  productions  of  society;  in  other  words,  the  powers  and  the  enjoy- 


CHAP.  IX.  ON  PRODUCTION.  99 

ments  of  mankind;  but  that  it  in  some  degree  degrades  the  faculties 
of  man  in  his  individual  capacity,  (a)  (1) 


CHAPTER  IX. 

OF  THE    DIFFERENT   METHODS   OF   EMPLOYING   COMMERCIAL   INDUSTRY,   AND 
THE  MODE  IN  WHICH  THEY  CONCUR  IN  PRODUCTION. 

COMMODITIES  are  not  all  to  be  had  in  all  places  indifferently. 
The  immediate  products  of  the  earth  depend  upon  the  local  varie- 
ties of  soil  and  climate ;  and  even  the  products  of  industry  are  met 
with  only  in  such  places  as  are  most  favourable  to  their  production. 

Whence  it  follows  that,  where  products,  whether  of  industry  or 
of  the  earth,  do  not  grow  naturally,  they  can  not  be  introduced  or 
produced  in  a  perfect  state,  and  fit  for  consumption,  without  under- 
going a  certain  modification ;  that  is  to  say,  that  of  transport  or  con- 
veyance. 

This  transfer  gives  occupation  to  what  has  been  called  commercial 
industry. 

External  commerce  consists  of  the  supply  of  the  home  market 
with  foreign,  and  of  foreign  markets  with  home  products.* 

Wholesale  commerce  is  the  buying  of  large  quantities  and  re- 
selling to  inferior  dealers. 

Retail  commerce  is  the  buying  of  wholesale  dealers,  and  re-selling 
to  consumers. 

*  Products  that  are  bought  to  be  re-sold,  are  called  merchandise;  and  merchan- 
dise bought  for  consumption  is  denominated  commodities,  (i) 

(a)  This  consideration  makes  it  peculiarly  incumbent  upon  the  government 
of  a  manufacturing  nation  to  diffuse  the  benefits  of  early  education,  and  thus 
prevent  the  degeneration  from  being  intellectual  as  well  as  corporeal.  T. 

(6)  This  distinction  has  been  discarded  in  the  translation,  for  the  sake  of 
simplification;  the  general  term  products  being  sufficiently  intelligible  and 
specific.  T. 

(1)  ["The  extensive  propagation  of  light  and  refinement,"  says  DUGALD 
STEWART,  "  arising  from  the  influence  of  the  press,  aided  by  the  spirit  of  com- 
merce, seems  to  be  the  remedy  to  be  provided  by  nature  against  the  fatal  effects 
which  would  otherwise  be  produced,  by  the  subdivision  of  labour  accompanying 
the  progress  of  the  mechanical  arts :  nor  is  any  thing  wanting  to  make  the 
remedy  effectual,  but  wise  institutions  to  facilitate  general  instruction,  and  to 
adapt  the  education  of  individuals  to  the  stations  they  are  to  occupy.  The  mind 
of  the  artist,  which,  from  the  limited  sphere  of  his  activity,  would  sink  below 
the  level  of  the  peasant  or  the  savage,  might  receive  in  infancy  the  means  of 
intellectual  enjoyment  and  the  seeds  of  moral  improvement;  and  even  the  insipid 
uniformity  of  his  professional  engagements,  by  presenting  no  object  to  awaken 
his  ingenuity  or  to  distract  his  attention,  might  leave  him  at  liberty  to  employ 
his  faculties  on  subjects  more  interesting  to  himself,  and  more  extensively  useful 
to  others."] 

AMERICAN  EDITOR, 


100  ON  PRODUCTION.  BOOK  I. 

The  commerce  of  money  or  specie  is  conducted  by  the  banker, 
who  receives  or  pays  on  account  of  other  people,  or  gives  bills,  or- 
ders, or  letters  qf  credit,  payable  elsewhere  than  at  the  place  where 
they  are  given.  This  is  sometimes  called  the  banking  trade,  (a) 

The  broker  brings  buyers  and  sellers  together. 

The  persons  engaged  in  these  several  branches  are  all  agents  of 
commercial  industry,  whose  agency  tends  to  approximate  products 
to  the  hands  of  the  ultimate  consumer.  The  agency  of  the  retailer 
of  an  ounce  of  pepper  is  quite  as  indispensable  to  the  consumer,  as 
that  of  the  merchant,  who  despatches  his  vessel  to  the  Moluccas  for 
a  cargo ;  and  the  only  reason  why  these  different  functions  are  not 
both  performed  by  one  and  the  same  individual  is,  because  they  can 
be  executed  with  more  economy  and  convenience  by  two.  To  enter 
minutely  into  an  examination  of  the  limits  and  practices  of  these 
various  departments  of  commercial  industry,  would  be  to  write  a 
treatise  on  commerce.*  All  we  have  to  do  in  this  work  is,  to  in- 
quire in  what  manner  and  degree  they  influence  the  production  of 
values. 

In  Book  II.,  we  shall  see  how  the  actual  demand  for  a  product 
originating  in  its  utility,  is  limited  by  the  amount  of  the  cost  of 
production,  and  upon  what  principle  its  relative  value  is  determined 
in  each  particular  place.  At  present  it  is  sufficient  for  the  clear  con 
ception  of  commercial  production,  to  consider  the  value  of  a  product 
as  a  given  quantity  or  datum.  Thus,  without  examining  the  reason 
why  oil  of  olives  is  worth  at  Marseilles  thirty,  and  at  Paris  forty 
sous  per  lb.,  I  shall  content  myself  with  simply  stating,  that  who- 
ever effects  the  transport  of  that  article  from  Marseilles  to  Paris, 
thereby  increases  its  value  to  the  amount  of  ten  sous  per  lb.  Nor 
is  it  to  be  supposed,  that  its  intrinsic  value  has  received  no  accession 
by  the  transit.  The  value  has  positively  augmented.  The  intrinsic 
value  of  silver  is  greater  at  Paris  than  at  Lima ;  and  the  cases  are 
precisely  similar. 

In  fact,  the  transport  of  products  can  not  be  effected  without  the 
concurrence  of  a  variety  of  means,  which  have  each  an  intrinsic 
value  of  their  own,  and  of  wyhich  the  actual  transport  itself,  in  the 
literal  and  confined  sense  of  the  term,  is  commonly  not  the  most 
chargeable.  There  must  be  one  commercial  establishment  at  tho 

*A  complete  treatise  on  commerce  is  still  a  desideratum  in  literature,  not- 
withstanding the  labours  of  Melon  and  ForlmjinaiR,  for  hitherto  the  principles 
and  consequences  of  commerce  have  been  little  understood.  (1) 

(a)  The  banker's  business  is  not  confined  to  dealings  in  metal,  coined  or  un- 
coined, but  is  extended  to  dealings  in  paper-money,  and  dealings  in  credit,  as 
<ve  shall  see  when  we  come  to  the  chapter  upon  money,  infra.  T. 

(1)  The  Society  for  the  Diffusion  of  Useful  Knowledge,  in  London,  in  1833, 
published  a  Treatise  on  Commerce,  by  J.  R.  M'Culloch,  Esq.  the  eminent  poli- 
tical economist,  in  which  the  grand  principles,  practice  and  history  of  Com- 
merce, are  unfolded  and  explained  with  great  ability.  It  is  a  work  that  should 
l>e  lead  by  every  well-educated  merchant. 

AMERICAN  EDITOR. 


CHAP.  IX.  ON  PRODUCTION.  ipj 

place  where  the  products  are  collected ;  another  at  the  place  it  is 
transported  to ;  besides  package  and  warehousing. 

There  must  be  an  advance  of  capital  equivalent  to  the  value  trans- 
ported. Moreover,  there  are  agents,  insurers,  and  brokers,  to  be 
paid.  All  these  are  really  productive  occupations,  since,  without 
their  agency,  the  consumer  can  never  enjoy  the  product;  and  suppos- 
ing their  remuneration  to  be  reduced  by  competition  to  the  lowest 
rate  possible,  he.  can  be  in  no  way  cheaper  supplied. 

In  commercial,  as  well  as  manufacturing  industry,  the  discovery 
of  a  more  economical  or  more  expeditious  process,  the  more  skilful 
employment  of  natural  agents,  the  substitution,  for  instance,  of  a  canal 
in  place  of  a  road,  or  the  removal  of  a  difficulty  interposed  by  nature 
or  by  human  institutions,  reduces  the  cost  of  production,  and  pro- 
cures a  gain  to  the  consumer,  without  any  consequent  loss  to  the 
producer,  who  can  lower  his  price  without  prejudice  to  himself, 
because  his  own  outlay  and  advance  are  likewise  reduced. 

The  same  principles  govern  both  external  and  internal  commerce. 
The  merchant  that  exports  silks  to  Germany  or  to  Russia,  and  sells 
at  Petersburg  for  40  cents  per  yard,  stuffs  that  have  cost  but  30 
cents  at  Lyons,  creates  a  value  of  10  cents  per  yard.  If  the  same  mer- 
chant brings  a  return  cargo  of  peltry  from  Russia,  and  sells  at  Havre 
for  240  dollars  what  cost  him  at  Riga  but  200  dollars,  or  a  value  equiva- 
lent to  200  dollars,  there  will  be  a  new  value  of  40  dollars,  created  and 
shared  amongst  the  different  agents  engaged  in  this  production  of 
value,  whatever  nation  they  may  belong  to,  and  whatever  be  the  rela- 
tive importance  of  their  respective  productive  agency,  from  the  first- 
rate  merchant  to  the  ticket-porter  inclusive.*  And  by  this  creation 
of  value,  the  wealth  of  the  French  nation  is  enriched  to  the  amount  of 
all  the  gains  of  French  industry  and  of  French  capital,  in  the  course 
of  this  production;  and  the  Russian  nation  to  the  amount  of  those  of 
Russian  industry  and  Russian  capital.  Nay,  perhaps  a  third  nation, 
independent  both  of  France  and  of  Russia,  may  get  the  whole  profit 
accruing  from  the  mutual  commercial  intercourse  between  these 
nations ;  and  yet  neither  of  them  loses  any  thing,  if  their  industry  and 
capital  have  other  equally  lucrative  employments  ai  home.  The 
very  circumstance  of  the  existence  of  an  active  external  commerce, 
no  matter  what  agents  it  be  conducted  by.  is  a  very  powerful  stimu- 
lus to  internal  industry.  The  Chinese,  who  abandon  the  whole  of 
their  external  commerce  to  other  nations,  must  nevertheless  raise  an 
enormous  gross  product,  otherwise  they  could  never  support,  as  they 
do,  a  population  twice  as  large  as  that  of  all  Europe,  upon  a  surface 
of  nearly  equal  extent.  A  shop-keeper  in  good  business  is  quite  as 
well  off  as  a  pedlar  that  travels  the  country  with  his  wares  on  his 
back.f  Commercial  jealousy  is,  after  all,  nothing  but  prejudice  :  it 
is  a  wild  fruit,  that  will  drop  of  itself  when  it  has  arrived  at  maturity. 

*  The  ordinary  proportions  of  this  division  will  be  explained,  infra,  Book  II. 
Chap.  7. 

f  It  has  been  often  asked,  Why  not  combine  commercial  with  agricultural  and 
9* 


102  ON  PRODUCTION.  BOOK  L 

The  external  commerce  of  all  countries  is  inconsiderable,  com- 
pared with  the  internal.  To  convince  ourselves  of  the  truth  of  this 
position,  it  will  be  sufficient  to  take  note  at  all  numerous  or  even 
sumptuous  entertainments,  how  very  small  is  the  proportion  of 
values  of  foreign  growth,  in  comparison  with  those  of  home  produc- 
tion; especially,  if  we  take  into  the  account,  as  we  ought  to  do,  the 
value  of  buildings  and  habitations,  which  is  necessarily  of  home 
production.*  (a) 

The  internal  commerce  of  a  country,  though,  from  its  minute 
i  amification,  it  is  less  obvious  and  striking,  besides  being  the  most 
considerable,  is  likewise  the  most  advantageous.  (1)  For  both  the 
remittances  and  returns  of  this  commerce  are  necessarily  home  pro- 
ducts. It  sets  in  motion  a  double  production,  and  the  profits  of  it 
are  not  participated  with  foreigners.  For  this  reason,  roads,  canals, 
bridges,  the  abolition  of  internal  duties,  (i)  tolls,  duties  on  transit,  (c) 
which  are  in  effect  tolls,  every  measure,  in  short,  which  promotes 
internal  circulation,  is  favourable  to  national  wealth. 

manufacturing  productions'?  Why,  for  the  same  reason  that  makes  a  whole- 
sale cotton  spinner,  if  he  have  a  surplus  of  time  and  capital,  more  apt  to  extend 
his  spinning  concern,  than  to  employ  his  labour  and  capital  in  the  working  up 
of  his  own  filiature  into  muslin  and  printed  calicoes. 

*  It  would  be  impossible  to  estimate  the  proportion  with  any  tolerable  accu- 
racy, even  in  countries  where  calculations  of  this  kind  are  most  in  vogue.  In- 
deed, the  attempt  would  be  a  sad  waste  of  time.  To  say  the  truth,  statistical 
statements  are  of  little  real  utility ;  for,  be  their  accuracy  ever  so  well  assured, 
hey  can  only  be  correct  for  the  moment.  The  only  knowledge  really  useful  is, 
the  knowledge  of  general  principles  and  laws,  that  i$  to  say,  the  knowledge  of 
the  connexion  between  cause  and  effect,  which  alone  can  safely  teach  us  what 
measures  it  is  best  to  adopt  in  every  possible  emergency.  The  sole  use  of  sta- 
tistics in  political  economy  is,  to  supply  examples  and  illustrations  of  general 
principles.  They  can  never  be  the  basis  of  principles,  which  are  gipunded  upon 
the  nature  of  things ;  whereas  statistics,  in  the  most  improved  state,  are  only  an 
index  of  their  quantity. 

(a)  This  position  may  be  correct  or  not,  according  to  circumstances.  The 
national  wants  must  always,  in  the  long  run,  be  supplied  by  the  national  indus- 
try and  exertions :  but  what  is  there  to  prevent  a  nation  from  exchanging  the 
larger  portion  of  its  domestic  products  for  the  products  of  other  nations  ?  The 
people  of  Tyre  probably  consumed  more  products  of  external  than  of  domestic 
industry,  although  indeed  those  external  must  have  been  purchased  with  domes- 
tic products.  Tyre,  it  is  true,  was  rather  a  city  than  a  nation.  Holland  resem- 
bled her  in  many  particulars.  The  observation  applies  to  every  community,  the 
chief  part  of  whose  production  is,  the  modification  of  external  products.  T. 

(ft)  Douanes.  (c)  Octrois. 

(1)  [The  author  has  here,  in  common  with  Dr.  Smith,  fallen  into  an  error. 
Capital,  whether  employed  in  the  home  or  foreign  trade,  is  equally  productive. 
If,  for  example,  the  home  trade  realized  greater  profits  than  foreign  commerce, 
every  cent  of  capital  employed  in  the  latter  would,  in  a  very  little  time,  be  with- 
drawn from  so  comparatively  disadvantageous  an  investment.  Capital  will  flow 
into  the  foreign,  instead  of  the  home  trade,  only  because  it  will  thereby  yield  a 
larger  profit.  The  internal  commerce  of  a  country  cannot  therefore  be  said  to  be 
"  the  most  advantageous."]  AMERICAN  EDITOR. 


CHAP.  IX.  ON  PRODUCTION.  103 

There  is  a  further  branch  of  commerce,  called  the  trade  of  specu- 
lation, which  consists  in  the  purchase  of  goods  at  one  time,  to  be 
re-sold  in  the  same  place  and  condition  at  another  time,  when  they 
are  expected  to  be  dearer.  Even  this  trade  is  productive ;  its  utility 
consists  in  the  employment  of  capital,  warehouses,  care  in  the  pre- 
servation, in  short,  human  industry  in  the  withdrawing  from  circu- 
lation a  commodity  depressed  in  value  by  temporary  superabun- 
dance, and  thereby  reduced  in  price  below  the  charges  of  production, 
so  as  to  discourage  its  production,  with  the  design  and  purpose  of 
restoring  it  to  circulation  when  it  shall  become  more  scarce,  and 
when  its  price  shall  be  raised  above  the  natural  price,  the  charges  of 
production,  so  as  to  throw  a  loss  upon  the  consumers.  The  evident 
operation  of  this  kind  of  trade  is,  to  transport  commodities  in  respect 
of  time,  instead  of  locality.  If  it  prove  an  unprofitable  or  losing 
concern,  it  is  a  sign  that  it  was  useless  in  the  particular  instance,  and 
that  the  commodity  was  not  redundant  at  the  time  of  purchase,  and 
scarce  at  the  time  of  re-sale.  This  operation  has  also  been  denomi- 
nated, with  much  propriety,  the  trade  of  reserve.  («)  Where  it  is 
directed  to  the  buying  up  of  the  whole  of  an  article,  for  the  sake  of 
exacting  an  exorbitant  monopoly  price,  it  is  called  forestalling, 
which  is  happily  difficult,  in  proportion  as  the  national  commerce  is 
extensive,  and,  consequently,  the  commodities  in  circulation  both 
abundant  and  various. 

The  carrying  trade,  as  Smith  calls  it,  consists  in  the  purchase  of 
goods  in  one  foreign  market  for  re-sale  in  another  foreign  market 
This  branch  of  industry  is  beneficial  not  only  to  the  merchant  that 
practises  it,  but  also  to  the  two  nations  between  whom  it  is  practised ; 
and  that  for  reasons  which  have  been  explained  while  treating  of  ex- 
ternal commerce.  The  carrying  trade  is  but  little  suited  to  nations 
possessed  of  small  capital,  whereof  the  whole  is  wanted  to  give  activ- 
ity to  internal  industry,  which  is  always  entitled  to  the  preference. 
The  Dutch  carry  it  on  in  ordinary  times  with  advantage,  because  their 
population  and  capital  are  both  redundant,  (b)  The  French,  in  peace 
time,  have  carried  on  a  lucrative  carrying  trade  between  the  different 
ports  of  the  Levant;  because  adventurers  could  procure  advances  of 
capital  on  better  terms  in  France  than  in  the  Levant,  and  were  per- 
haps less  exposed  to  the  oppression  of  the  detestable  government  of 
that  country.  They  have  since  been  supplanted  by  other  nations, 
whose  possession  of  the  carrying  trade  is  so  far  from  being  an  injury 
to  the  subjects  of  the  Porte,  that  it  actually  keeps  alive  the  little 
remaining  industry  of  its  territories.  Some  governments,  less  wise 
in  this  particular  than  the  Turkish,  have  interdicted  their  carrying 
trade  to  foreign  adventurers.  If  the  native  traders  can  carry  on  the 

V.a)  Commerce  de  reserve.  There  is  no  corresponding  term  in  English ;  it  in 
intelligible  enough. 

(6)  The  carrying  trade  of  Holland  is  now  almost  extinct.  In  fact,  whether  or 
no  it  be  suited  to  a  given  nation  at  a  given  time,  depends  upon  a  great  variety  of 
circumstances.  The  advantage  of  the  neutral  character  gave  a  very  large  pro- 
portion of  it  for  some  years  to  the  American  Union,  though  notoriously  deficient 
in  capital  for  the  purposes  of  internal  cultivation.  T 


104  ON  PRODUCTION.  BOOK  I. 

transport  to  greater  profit  than  foreigners,  there  is  no  occasion  to 
exclude  the  latter;  and,  if  it  can  be  conducted  cheaper  by  foreigners, 
their  exclusion  is  a  voluntary  sacrifice  of  the  profit  of  employing 
them.  An  example  will  serve  to  elucidate  this  position.  The  freight 
of  hemp  from  Riga  to  Havre  costs  a  Dutch  skipper,  say  7  dollars  per 
ton.  It  must  be  taken  for  granted,  that  no  other  but  the  Dutchman  can 
carry  it  so  cheap.  He  makes  a  tender  to  the  French  government, 
which  is  a  consumer  of  Russian  hemp,  to  provide  tonnage  at  8  dollars 
per  ton,  thereby  obviously  securing  to  himself  a  profit  of  1  dollar  per 
ton.  Suppose  then,  that  the  French  government,  with  a  view  to  favour 
the  national  shipping,  prefers  to  employ  French  tonnage,  which  can 
not  be  navigated  for  less  than  10  dollars  per  ton,  or  11  dollars,  allow- 
ing the  same  profit  to  the  ship-owner — What  is  the  consequence?  Tho 
government  will  be  out  of  pocket  3  dollars  per  ton,  for  the  mere  pur- 
pose of  giving  a  profit  of  1  dollar  to  the  national  ship-owners.  And, 
as  none  but  the  individuals  of  the  nation  contribute  towards  the  na- 
tional expenditure,  this  operation  will  have  cost  to  one  class  of  French- 
men 3  dollars  for  the  purpose  of  giving  to  another  class  of  Frenchmen 
a  profit  of  1  dollar  only.  However  the  numbers  may  vary,  the  result 
must  be  similar;  for  there  is  but  one  fair  way  of  stating  the  account. 

It  is  hardly  necessary  to  caution  the  reader,  that  I  have  through- 
out been  considering  maritime  industry  solely  in  its  relation  to 
national  wealth.  Its  influence  upon  national  security  is  another  thing. 
The  art  of  navigation  is  an  expedient  of  war,  as  well  as  of  commerce. 
The  working  of  a  vessel  is  a  military  manoeuvre;  and  the  nation 
containing  the  larger  proportion  of  seamen,  is,  therefore,  ceteris 
paribus,  the  more  powerful  in  a  military  point  of  view;  conse- 
quently, political  and  military  considerations  have  always  interfered 
with  national  views  of  commerce,  in  matters  of  navigation;  and  Eng- 
land, in  passing  her  celebrated  Navigation  Act,  interdicting  her  car- 
rying trade  to  all  vessels,  the  owners  and  at  least  three-fourths  of  the 
crews  whereof  were  not  British  subjects,  had  in  view,  not  so  much 
the  profits  of  the  carrying  trade,  as  the  increase  of  her  own  military 
marine,  and  the  diminution  of  that  of  the  other  powers,  especially  of 
Holland,  which  then  enjoyed  an  immense  carrying  trade,  and  was 
the  chief  object  of  English  jealousy. 

Nor  can  it  be  denied,  that  these  views  may  actuate  a  wise  national 
administration;  assuming  always,  that  it  is  an  advantage  to  one 
nation  to  domineer  over  others.  But  these  political  dogmas  are  fast 
growing  obsolete.  Policy  will  some  day  or  other  be  held  to  consist 
in  coveting  the  pre-eminence  of  merit  rather  than  of  force.  The 
love  of  domination  never  attains  more  than  a  factitious  elevation,  that 
is  sure  to  make  enemies  of  all  its  neighbours.  It  is  this  that  engen- 
ders national  debt,  internal  abuse,  tyranny  and  revolution ;  while  the 
sense  of  mutual  interest  begets  international  kindness,  extends  the 
sphere  of  useful  intercourse,  and  leads  to  a  prosperity,  permanent, 
because  it  is  natural.  (1) 

(1)  [The  operation  of  the  British  Navigation-acts,  like  all  other  restrictive  re- 
C illations,  has  been  prejudicial  to  the  growth  of  national  wealth,  without,  at  the 
same  Urne,  having  contributed  in  any  degree  to  the  establishment  of  the  naval 


CHAP  X.  ON  PRODUCTION.  105 


CHAPTER  X. 

OF  THE   TRANSFORMATIONS   UNDERGONE    BY  CAPITAL   IN    THE    PROGRESS 
OP    PRODUCTION 

WE  have  seen  above  (Chap.  III.)  of  what  the  productive  capital  of 
a  nation  consists,  and  to  what  uses  it  is  applicable.  So  much  it  was 
necessary  to  specify,  in  enumerating  the  various  means  of  produc- 
tion. We  now  come  to  consider  and  examine,  what  becomes  of 
capital  in  the  progress  of  production,  and  how  it  is  perpetuated  and 
increased. 

To  avoid  fatiguing  the  reader  with  abstract  speculation,  I  shall 
begin  with  giving  examples,  which  I  shall  take  from  every  day's 
experience  and  observation.  The  general  principles  will  follow  of 
themselves,  and  the  reader  will  immediately  see  their  applicability 
to  all  other  cases,  which  he  may  have  occasion  to  pronounce  a  judg- 
ment upon. 

When  the  land-owner  is  himself  the  cultivator,  he  must  possess  a 
capital  over  and  above  the  value  of  his  land ;  that  is  to  say,  value  to 
some  amount  or  other  consisting,  in  the  first  place,  of  clearance  of  the 
ground,  together  with  works  and  erections  thereon,  which  may  at 
pleasure  be  looked  upon  as  part  of  the  value  of  the  estate,  but  which 

preponderance  of  Great  Britain.  "  If  it  can  be  made  to  appea  r,"  says  a  highly 
distinguished  political  economist,  "  that  the  greater  wealth  which  we  should,  in 
the  absence  of  these  laws,  have  possessed,  would  have  supplied  a  revenue  ade- 
quate to  the  maintenance  of  an  equal  number  of  seamen  in  the  navy,  it  would 
follow  that  we  are  no  gainers  by  these  acts ;  and  if  it  further  appear  that  this  ad- 
ditional revenue  would  have  been  equal  to  the  maintenance  of  twice  or  three 
times  as  many  seamen,  it  would  be  clear  that  we  are  losers  by  them.  It  is  acknow- 
ledged by  many  of  the  advocates  for  these  laws,  that  their  tendency  has  not  been 
to  increase  the  national  revenue,  but  in  some  degree  the  reverse. 

"  Our  national  preponderance,"  says,  we  believe,  Mr.  Homer,  "rests  on  a  very 
different  basis.  Our  national  energy  and  wealth  originate  in  OUT  freedom,  and 
in  that  security  of  property  which  is  its  happy  consequence.  The  number  of 
our  seamen  in  merchant  shipping  is  owing  to  the  spirit  and  capital  of  our  tra- 
ders, and  to  our  great  extent  of  coast.  The  magnitude  of  our  navy  is  due  neither 
to  navigation-acts,  nor  to  colonial  monopolies,  but  to  the  resources  of  an  indus- 
trious country. 

"  Howdifferent  are  the  ideas  suggested  by  such  observations,  from  the  narrow 
theories  of  those  who  trace  our  naval  superiority  to  the  operation  of  a  few  acts 
of  Parliament !  They  remind  us  of  the  technical  philosophy  of  the  judge,  who 
gravely  ascribed  the  lamentable  prevalence  of  duelling,  not  to  the  violence  of 
human  passions,  but  to  a  misapprehension  of  the  law  of  the  land  !  Besides,  our 
naval  greatness,  as  it  is  well  remarked  by  Dr.  Smith,  was  conspicuous  before 
our  navigation  laws  were  framed.  It  existed  then,  as  it  had  done  before,  and 
has  done  since,  in  a  degree  commensurate  with  our  commerce,  and  with  the  ex- 
tent of  our  national  prosperity.  These  circumstances,  and  not  navigation  laws, 
will  be  found  the  regulators  of  naval  power  in  all  countries.  They  determine 
its  extent  among  the  Dutch,  to  whom,  even  in  the  season  of  their  greatest  strength, 
navigation  laws  were  entirely  unknown."  Vide  Edinburgh  Review,  vol.  xiv. 
page  95.] 

AMERICAN  EDITOR 

o 


106  ON  PRODUCTION.  BOOK  L 

are,  nevertheless,  the  result  of  previous  human  exertion,  and  an  ac- 
cession to  the  original  value  of  the  land.* 

This  portion  of  his  capital  is  little  subject  to  wear  and  tear ;  trifling 
occasional  repairs  will  preserve  it  entire.  If  the  cultivator  obtain 
from  the  annual  produce  wherewithal  to  effect  these  repairs,  this 
item  of  capital  is  thereby  preservable  in  perpetuity. 

Ploughs,  and  other  farming  implements  and  utensils,  together 
with  the  animals  employed  in  tillage,  form  another  item  of  the  culti- 
vators capital,  and  an  article  of  much  quicker  consumption,  which, 
however,  may  in  like  manner  be  kept  up  and  renovated,  as  occasion 
may  require,  at  the  expense  of  the  annual  produce  of  the  concern, 
and  thus  be  maintained  at  its  full  original  amount. 

Finally,  he  must  have  stores  of  various  kinds;  seeds  for  his  ground, 
provisions,  fodder  for  his  cattle,  and  food  as  well  as  money  for  his 
labourers'  wages,  &c.f  Observe,  that  this  branch  of  capital  is  totally 
decomposed  once  in  the  course  of  the  year,  at  least ;  and  sometimes 
three  or  four  times  over.  The  money,  grain  and  provisions  of  eve- 
ry description  disappear  altogether;  but  so  it  must  necessarily  be, 
and  yet  not  an  atom  of  the  capital  is  lost,  if  the  cultivator,  after 
abstracting  from  the  produce  a  fair  allowance  for  the  productive 
service  of  his  land  (rent)  for  the  productive  service  of  the  capital 
embarked  (interest)  and  for  the  productive  service  of  the  personal 
labour  that  has  set  the  whole  in  motion  (wages),  contrive  to  make  the 
annual  produce  replace  the  outlay  of  money,  seed,  live  stock,  &c., 
even  to  the  article  of  manure,  so  as  to  put  himself  in  possession  of  a 
value  equal  to  what  he  started  with  the  preceding  year. 

Thus  we  find,  that  capital  may  yet  be  kept  up,  though  almost 
every  part  of  it  have  undergone  some  change,  and  many  part*  1*6 
completely  annihilated ;  for,  indeed,  capital  consists  not  in  this  or 
that  commodity  or  substance,  but  in  its  value. 

Nor  is  it  difficult  to  conceive,  that  if  the  estate  be  sufficiently 
extensive,  and  managed  with  order,  economy,  and  intelligence,  the 
profits  of  the  cultivator  may  enable  him  to  lay  by  a  surplus,  after 
replacing  the  entire  value  of  his  capital,  and  defraying  the  expenses 
of  himself  and  family.  The  mode  of  disposing  of  this  surplus  is  of 
the  utmost  importance  to  the  community,  and  will  be  treated  of  in 
the  next  chapter.  All  that  is  at  present  necessary  is,  to  impress  a 

*  Arthur  Yeung,  in  his  View  of  the  Agriculture  of  France,  makes  no  estimate 
of  this  item  of  capital  permanently  vested  in  the  land  of  France  within  its  old 
limits;  but  merely  reckons  it  to  be  less  than  the  capital  so  vested  in  England,  in 
the  proportion  of  36  livres  tournois  per  English  acre.  So  that,  in  the  very  mode- 
rate supposition,  that  half  as  much  capital  is  vested  in  permanent  amelioration  of 
the  land  in  France  as  in  England,  the  capital  so  vested  in  Old  France,  reckoned 
at  7  dollars  per  acre,  would  amount,  upon  131  millions  of  acres,  to  817  millions 
of  dollars  for  this  item  of  French  capital  alone. 

f  The  same  writer  (Young)  estimates,  that  in  France,  these  two  last  items  of 
capital,  viz.  implements,  beasts  of  husbandry,  stores  of  provisions,  &c.  may  be 
set  clown  at  9  dollars  per  acre,  one  acre  with  another;  making  an  aggregate  of 
1179  millions  of  dollars;  which,  added  to  the  former  estimate,  shows  a  total  of 
1996  millions  of  dollars,  capital  engaged  in  the  agricultural  industry  of  Old 
France  He  estimates  the  same  items  of  capital  in  England  at  twice  as  mucc 
;»r  acre. 


CHAP.  X.  ON  PRODUCTION.  107 

clear  conviction,  that  the  value  of  capital,  though  consumed,  is  not 
yet  destroyed,  wherever  it  has  been  consumed  in  such  way  as  to  re- 
produce itself;  and  that  a  concern  may  go  on  forever,  and  annually 
render  a  new  product  with  the  same  capital,  although  that  capital  be 
in  a  perpetual  course  of  consumption. 

After  tracing  capital  through  its  various  transformations  in  the 
department  of  agriculture,  it  will  be  easy  to  follow  its  transforma- 
tions in  the  other  two  departments  of  manufacture  and  commerce. 

In  manufacture,  as  well  as  agriculture,  there  are  some  branches  of 
capital  that  last  for  years ;  buildings  and  fixtures  for  instance,  machi- 
nery and  some  kinds  of  tools ;  others,  on  the  contrary,  lose  their 
form  entirely;  the  oil  and  pot-ash  used  by  soap-makers  cease  to  be 
oil  and  pot-ash  when  they  assume  the  form  of  soap.  In  the  same 
manner,  the  drugs  employed  in  dyeing  indigo  cease  to  be  Brazil 
wood  or  annatto,  as  the  case  may  be,  and  are  incorporated  with  the 
fabric  they  are  employed  in  colouring..  And  so  of  the  wages  and 
maintenance  of  the  labourers. 

In  commerce,  almost  the  whole  capital  undergoes  complete  trans- 
mutation, and  many  items  of  it  several  times  in  the  course  of  a  year. 
A  merchant  exchanges  his  specie  for  woollens  or  jewellery,  which  is 
one  change  of  form.  He  ships  them  for  Turkey,  and  on  the  voyage, 
some  more  of  his  money  is  converted  into  the  wages  of  the  crew. 
The  cargo  arrives  at  Constantinople,  where  he  sells  the  investment 
to  the  wholesale  dealers,  who  pay  him  in  bills  upon  Smyrna,  which 
is  a  second  metamorphosis ;  the  capital  embarked  is  now  in  the  shape 
of  bills,  which  he  makes  use  of  in  the  purchase  of  cotton  at  Smyrna; 
a  third  transformation.  The  cotton  is  shipped  for  France  and  sold 
there,  which  completes  the  fourth  change  of  form;  thus  reproducing 
the  capital,  most  probably  with  profit,  under  its  original  shape  of 
French  coin. 

It  is  obvious,'that  the  objects  capable  of  acting  the  part  of  capital 
are  innumerable.  If,  at  any  given  period,  one  wishes  to  know 
what  the  capital  of  a  nation  consisted  of,  it  would  be  found  composed 
of  an  infinity  of  objects,  commodities  and  substances,  of  which  it 
would  be  impossible  to  guess  the  aggregate  value  with  any  tolerable 
accuracy,  and  of  which  some  are  situated  many  thousand  leagues 
from  its  frontiers.  At  the  same  time,  it  appears  that  the  most  in- 
significant and  perishable  articles  are  a  part,  and  often  a  very  im- 
portant part,  too,  of  the  national  capital ;  that  although  the  items  of 
capital  are  in  a  continual  course  of  consumption  and  decomposition, 
it  by  no  means  follows,  that  the  capital  itself  is  destroyed  and  con- . 
sumed,  provided  that  its  value  be  preserved  in  some  other  shape ; 
consequently,  that  the  introduction  or  import  of  the  vilest  and  most 
perishable  commodities  may  be  just  as  profitable  as  that  of  the  most 
costly  and  durable — gold  or  silver;  that,  in  fact,  the  former,  are 
more"  profitable  the  instant  they  are  more  sought  after;  that  the  pro- 
ducers themselves  are  the  only  competent  judges  of  the  transforma- 
tion, export,  and  import,  of  these  various  matters  and  commodities: 


108  ON  PRODUCTION.  BOOK  L 

and  that  every  government  which  interferes,  every  system  calculated 
to  influence  production,  can  only  do  mischief. 

There  are  concerns,  in  which  the  capital  is  completely  renovated, 
and  the  work  of  production  begun  afresh,  several  times  in  the  year. 
An  operation  of  manufacture,  that  can  be  perfected  and  the  product 
sold  in  three  months,  will  admit  of  the  capital  being  turned  to 
account  annually  four  times.  It  may  be  supposed  that  the  profit 
each  time  is  less  than  when  the  capital  is  turned  but  once  in  twelve 
months.  Were  it  otherwise,  there  would  be  four  times  the  profit 
gained  ;  an  advantage  that  would  soon  attract  an  overflow  of  capital 
in  this  particular  channel,  and  lower  the  profit  by  competition.  On 
the  other  hand,  products  that  it  requires  more  than  a  year  to  perfect, 
such  as  leather,  must,  over  and  above  the  original  capital,  yield  the 
profits  of  more  than  one  year ;  otherwise,  who  could  undertake  to 
raise  them  ? 

In  the  trade  of  Europe  with  China  and  the  East  Indies,  the  capi- 
tal embarked  is  two  or  three  years  before  its  return.  Nor  is  it  ne- 
cessary in  commerce  or  in  manufacture,  any  more  than  in  agricul- 
ture, which  has  been  cited  as  an  example,  that  the  capital  should  be 
realized  in  the  form  of  money,  to  be  entirely  replaced.  Merchants 
and  manufacturers,  for  the  most  part,  realize  in  this  way  the  whole 
of  their  capital  but  once  in  their  lives,  and  that  is  when  they  wind 
up  and  leave  off  business.  Yet  they  are  at  no  loss  to  discover  at  any 
time  whether  their  capital  be  enlarged  or  diminished,  by  referring  to 
the  inventory  of  their  assets  for  the  time  being. 

The  capital  employed  on  a  productive  operation  is  always  a  mere 
advance  made  for  payment  of  productive  services,  and  reimbursed 
by  the  value  of  their  resulting  product 

The  miner  extracts  the  ore  from  the  bowels  of  the  earth ;  the 
iron-founder  pays  him  for  it.  Here  ends  the  miner's  production, 
which  is  paid  for  by  an  advance  out  of  the  capital  of  the  iron-found- 
er. This  latter  next  smelts  the  ore,  refines  and  makes  it  into  steel, 
which  he  sells  to  the  cutler :  thus  is  the  production  of  the  founder 
paid,  and  his  advance  reimbursed  by  a  second  advance  on  the  part 
of  the  cutler,  made  in  the  price  for  the  steel.  This  again  the  cutler 
works  up  into  razor-blades,  the  price  for  which  replaces  his  advance 
of  capital,  and  at  the  same  time  pays  for  his  productive  agencv. 

It  is  manifest,  then,  that  the  value  of  the  ultimate  produ«t.  ra^or- 
blades,  has  been  sufficient  to  replace  all  the  capital  successively  em- 
ployed in  its  production,  and,  at  the  same  time,  to  pay  for  the  pro- 
duction itself;  or  rather,  that  the  successive  advances  of  capital  have 
paid  for  the  productive  services,  and  the  price  of  the  product  has 
reimbursed  those  advances ;  which  is  precisely  the  same  tning  as  if 
the  aggregate  or  gross  value  of  the  product  had  gone  immediately 
lo  defray  tne  charges  of  its  production. 


CHAP.  XI.  ON  PRODUCTION.  109 


CHAPTER  XI. 


Lv  the  foregoing  chapter,  I  have  shown  how  productive  capital, 
though  kept,  during  the  progress  of  production,  in  a  continual  state 
of  employment,  and  subject  to  perpetual  change  and  wear,  is  yet 
ultimately  reproduced  in  full  value,  when  the  business  of  production 
is  at  an  end.  Since,  then,  wealth  consists  in  the  value  of  matter  or 
substance,  not  in  the  substance  or  matter  itself,  I  trust  my  readers 
have  clearly  comprehended,  that  the  productive  capital  employed, 
notwithstanding  its  frequent  transmutations,  is  all  the  while  the  same 
capital. 

It  will  be  conceived  with  equal  facility,  that,  inasmuch  as  the  value 
produced  has  replaced  the  value  consumed,  that  produced  value  may 
be  equal,  inferior,  or  superior  in  amount,  to  the  value  consumed, 
according  to  circumstances.  If  equal,  the  capital  has  been  merely 
replaced  and  kept  up ;  if  inferior,  the  capital  has  been  encroached 
upon ;  but  if  superior,  there  ha»been  an  actual  increase  and  accession 
of  capital.  This  is  precisely  the  point  to  which  we  traced  the  culti- 
vator, cited  by  way  of  an  example  in  the  preceding  chapter.  We 
supposed  him,  after  the  complete  re-establishment  of  his  capital,  so 
as  to  put  him  in  a  condition  to  begin  the  new  year's  cultivation  with 
equal  means  at  his  disposal,  to  have  netted  a  surplus  produce  beyond 
his  consumption  of  some  value  or  other ;  say  of  1000  dollars. 

Now,  let  us  observe  the  various  methods,  in  which  he  may  dispose 
of  his  surplus  of  1000  dollars;  for  simple  as  the  matter  may  appear 
to  be,  there  is  no  point  upon  which  more  error  has  prevailed,  or 
which  has  greater  influence  upon  the  condition  of  mankind. 

Whatever  kind  of  produce  this  surplus,  which  we  have  valued  at 
1000  dollars,  may  consist  of,  the  owner  may  exchange  it  for  gold  or 
silver  specie,  and  bury  it  in  the  earth  till  he  wants  it  again.  Does 
the  national  capital  suffer  a  loss  of  1000  dollars  by  this  operation? 
Certainly  not;  for  we  have  just  seen,  that  the  value  of  that  capital 
was  before  completely  replaced.  Has  any  one  been  injured  to  that 
amount?  By  no  means;  for  he  has  neither  robbed  nor  cheated  any 
body,  and  has  received  no  value  whatever,  without  giving  an  equiva- 
lent. It  may  be  said,  perhaps,  he  has  given  wheat  in  exchange  for 
the  dollars  he  has  thus  buried,  which  wheat  was  very  soon  con- 
sumed ;  yet  the  1000  dollars  still  continue  withdrawn  from  'the 
capital  of  the  community.  But  I  trust  it  will  be  recollected,  that 
wheat,  as  well  as  silver  or  gold,  may  compose  a  part  of  the  national 
capital ;  indeed,  we  have  seen  that  national  capital  must  necessarily 
consist,  in  a  great  measure,  of  wheat  and  such  like  substances,  liable 
to  either  partial  or  total  consumption,  without  any  diminution  of 
capital  thereupon ;  for,  in  short,  that  reproduction  completely  replaces 
the  value  consumed,  including  the  profits  of  the  producers,  whose 
10 


1JO  ON  PRODUCTION.  BOOK  I 

productive  agency  is  part  of  the  value  consumed.  Wherefore,  the 
instant  that  the  cultivator  has  fully  replaced  his  capital,  and  begins 
again  with  the  same  means  as  before,  the  1000  dollars  may  be 
thrown  into  the  sea  without  reducing  the  national  capital. 

But  let  us  trace  the  disposal  of  this  surplus  of  1000  dollars  to 
every  imaginable  destination.  Suppose,  for  instance,  that  instead  of 
being  buried,  they  have  been  spent  by  the  cultivator  upon  an  elegant 
entertainment.  In  this  case,  this  whole  value  has  been  destroyed  in 
an  afternoon;  a  sumptuous  feast,  a  ball,  and  fireworks,  will  have 
swallowed  up  the  whole.  The  value  thus  destroyed  exists  no  longer 
in  the  community :  it  no  longer  forms  an  item  in  the  aggregate  of 
wealth;  for  those  persons,  into  whose  hands  the  identical  pieces  of 
silver  have  come,  have  given  an  equivalent  in  wines,  refreshments, 
eatables,  gunpowder,  &c.,  all  which  values  are  reduced  to  nothing ; 
the  gross  national  capital,  however,  is  no  more  diminished  in  this 
case  than  in  the  former.  A  surplus  value  had  been  produced ;  and 
this  surplus  is  all  that  has  been  destroyed,  so  that  things  remain  just 
as  they  were. 

Again,  suppose  these  1000  dollars  to  have  been  spent  in  the  pur- 
chase of  furniture,  plate,  or  linen.  Still  there  is  no  reduction  of 
national  productive  capital ;  although*  it  must  be  allowed  there  is  no 
accession ;  for  in  this  case,  nothing  more  is  gained  than  the  additional 
comforts  the  cultivator  and  his  family  derive  from  the  newly  pur 
chased  moveables. 

Fourthly  and  lastly,  suppose  the  cultivator  to  add  this  excess  ol 
1000  dollars  to  his  productive  capital,  that  is  to  say,  to  re-employ  it 
in  increasing  the  productive  powers  of  his  farm  as  circumstances 
may  require,  in  the  purchase  of  more  beasts  of  husbandry,  or  the 
hire  and  support  of  more  labourers ;  and  in  consequence,  at  the  end 
of  the  year,  to  gather  produce  enough  to  replace  the  full  value  of  the 
1000  dollars,  with  a  profit,  in  such  manner,  as  to  make  them  capable 
of  yielding  a  fresh  product  the  year  after,  and  so  on  every  year  to 
eternity.  It  is  then,  and  then  only,  that  the  productive  capital  of  the 
community  is  really  augmented  to  that  extent. 

It  must  on  no  account  be  overlooked,  that,  in  one  way  or  other,  a 
saving  such  as  that  we  have  been  speaking  of,  whether  expended 
productively  or  unproductively,  still  is  in  all  cases  expended  ana 
consumed ;  and  this  is  a  truth,  that  must  remove  a  notion  extremely 
false,  though  very  much  in  vogue — namely,  that  saving  limits  and 
injures  consumption.  No  act  of  saving  subtracts  in  the  least  from 
consumption,  provided  the  thing  saved  be  re-invested  or  restored  to 
productive  employment.  On  the  contrary,  it  gives  rise  to  a  con- 
sumption perpetually  renovated  and  recurring ;  whereas  there  is  no 
repetition  of  an  unproductive  consumption,  (a) 

(a)  On  the  subject  of  saving,  Sismondi,  and  after  him  our  own  Malthus,  have 
adopted  a  different  opinion.  According  to  them,  the  powers  of  production  have 
already  outrun  the  desire  and  the  ability  to  consume ;  consequently,  every  thing 
that  tends  to  reduce  that  desire  is  injurious,  because  it  is  already  too  inert  for 
the  interests  of  production.  Wherefore,  inasmuch  as  the  desire  of  accumuiation 


CHAP.  XI.  ON  PRODUCTION.  HI 

It  must  be  observed,  too,  that  the  form  in  which  the  value  saved 
is  so  saved  and  re-employed  productively,  makes  no  essential  differ- 
ence. The  saving  is  made  with  more  or  less  advantage,  according 
to  the  circumstances  and  intelligence  of  the  person  making  it.  Nor 
is  there  any  reason  why  this  portion  of  capital  should  not  have  been 
accumulated,  without  ever  having  for  a  moment  assumed  the  form  of 
specie.  It  may  be  that  an  actual  product  of  the  farm  has  been  saved 
and  resown  or  planted,  without  having  undergone  any  transmutation  ; 
perhaps  the  wood,  that  might  have  been  used  as  firing  to  warm  su- 
perfluous apartments,  may  nave  been  converted  into  palings  or  other 
carpenter's  work ;  and  what  was  cut  down  in  the  first  instance  as  an 
item  of  revenue,  be  so  employed,  as  to  become  an  item  of  capital. 

Now,  the  only  way  of  augmenting  the  productive  capital  of  indi- 
viduals, as  well  as  the  aggregate  productive  capital  of  the  community, 
is  by  this  process  of  saving ;  in  other  words,  of  re-employing  in  pro- 
duction more  products  created  than  have  been  consumed  n  their  cre- 
ation. Productive  capital  cannot  be  accumulated  by  the  mere  scra- 
ping together  of  values  without  consuming  them;  nor  any  otherwise, 
than  by  withdrawing  them  from  unproductive,  and  devoting  them  to 
reproductive  consumption.  There  is  nothing  odious  in  the  real 
picture  of  the  accumulation  of  capital ;  we  shall  presently  see  its 
happy  consequences. 

is  the  direct  opposite  of  that  of  consumption,  it  must  of  necessity  be  injurious  in 
the  highest  degree.  On  these  principles,  it  might  be  proved  without  difficulty, 
that  the  prodigality  of  public  authority,  war,  or  the  poor  law  of  England,  is  a 
national  benefit:  for  all  of  them  stimulate  consumption.  Indeed  they  leave  their 
readers  to  draw  this  inevitable  conclusion ;  for  they  maintain  in  plain  terms,  that 
the  enlargement  of  the  productive  powers  of  man,  by  the  use  of  machinery  or 
otherwise,  makes  the  existence  of  unproductive  consumers  a  matter,  not  of  mere 
possibility  or  probability,  but  of  actual  necessity  and  expedience.  (Vide  Sis- 
mondi,  Nouv.  Prin.  liv.  ii.  c.  3.  and  liv.  iv.  c.  4.  Malthus,  Prin.  of  Pol.  Econ.} 
These  maxims  would  justify  the  prodigality  of  Louis  XIV.  of  France,  and  of  the 
Pitt  system  of  England.  But  fortunately  they  are  erroneous;  and  if  the  contrary 
principles  laid  down  by  our  author  here  and  infra,  Chap.  XV.,  needed  further 
illustration  or  support,  they  have  been  rendered  still  more  clear  and  convincing 
by  his  recent  Lettres  a  M.  Malthus. — It  is  true,  that  the  enlargement  of  pro- 
ductive power  naturally  leads  to  the  multiplication  of  unproductive  consumers: 
why  1  because  the  desire  of  barren  consumption,  instead  of  being  inert,  is  always 
active  in  the  human  breast.  But  that  multiplication  is  not  necessary  ;  fcr  the 
consumer  may  be  made  a  producer,  if  not  of  material,  at  least  of  immaterial  pro- 
ducts, which  latter  are  capable  of  infinitely  more  multiplication  and  variety,  as 
well  as  of  more  general  diffusion  than  material  products.  While  this  field  re- 
mains open,  a  national  administration  never  need  despair  of  finding  occupation 
for  the  human  labour  supplanted  by  machinery.  And  what  is  the  parsimony  of 
moJern  days]  It  is  not  the  hoarding  of  coin  or  other  valuables,  which,  though 
as  our  author  observes,  it  subtracts  nothing  from  the  national  capital,  is  yet  a 
social  mischief,  because  it  suspends  the  utility  of  an  existing  product,  or  at  any 
rate,  prevents  it  from  yielding  the  human  gratification,  which  its  barren  con- 
sumption would  afford.  The  accumulations  of  the  miser  are  now  either  vested  in 
reproduction  which  is  beneficial,  or  in  the  ownership  of  the  sources  of  produc- 
tion, land,  &c.  &c.  which  it  matters  not  to  public  wealth  who  may  be  possessed 
of,  or  in  the  incumbrances  of  those  sources,  mortgages,  national  funds,  &c.  &c., 
which  are  but  portions  of  that  ownership,  and  to  which  the  same  observation 
applies.  T. 


1 12  ON  PRODUCTION.  BOOK  I. 

The  form  under  which  national  capital  is  accumulated,  is  com- 
monly determined  by  the  respective  geographical  position,  the  moral 
character,  and  the  peculiar  wants  of  each  nation.  The  accumula- 
tions of  a  society  in  its  early  stages  consist,  for  the  most  part,  of 
buildings,  implements  of  husbandry,  live  stock,  improvements  of 
land ;  those  of  a  manufacturing  people  chiefly  of  raw  materials,  or 
such  as  are  still  in  the  hands  of  its  workmen,  in  a  more  or  less 
finished  state ;  and  in  some  part,  of  the  necessary  manufacturing 
tools  and  machinery.  In  a  nation  devoted  to  commerce,  capital  is 
mostly  accumulated  in  the  form  of  wrought  or  unwrought  goods, 
that  have  been  bought  by  the  merchant  for  the  purpose  of  re-sale. 

A  nation  that  at  the  same  time  directs  its  energies  to  all  three 
branches  of  industry,  namely,  agriculture,  manufactures,  and  com- 
merce, has  a  capital  compounded  of  all  three  different  forms  of  pro- 
duction ;  of  that  amazing  quantity  of  stores  of  every  kind,  that  we 
find  civilized  society  actually  possessed  of;  and  which,  by  the  intel- 
ligent use  that  is  made  of  them,  are  constantly  renovated,  or  even 
increased,  in  spite  of  their  enormous  consumption,  provided  that  the 
industry  of  the  community  produces  more  than  is  destroyed  by  its 
consumption. 

I  do  not  mean  to  say,  that  each  nation  has  produced  and  laid  by 
the  identical  article  that  composes  its  actual  capital.  Values,  in  some 
shape  or  other,  have  been  produced  and  laid  by;  and  these,  through 
various  transmutations,  have  assumed  the  form  most  convenient  foi 
the  time  being.  A  bushel  of  wheat  saved  will  feed  a  mason  as  well 
as  a  worker  in  embroidery.  In  the  one  case,  the  bushel  of  wheat 
will  be  reproduced  in  the  shape  of  the  masonry  of  a  house;  in' the 
other,  under  that  of  a  laced  suit. 

Every  adventurer  in  industry,  that  has  a  capital  of  his  own  em- 
barked in  it,  has  ready  means  of  employing  his  saving  productively ; 
if  engaged  in  husbandry,  he  buys  fresh  parcels  of  land  ;  or,  by  judi- 
cious outlays  and  improvements,  augments  the  productive  powers  of 
what  already  belongs  to  him ;  if  in  trade,  he  buys  and  sells  a  greater 
quantity  of  merchandise.  Capitalists  have  nearly  the  same  advan- 
tage :  they  invest  their  whole  savings  in  the  same  manner  as  their 
former  capital  is  invested,  and  increase  it  pro  tanto,  or  look  out  for 
new  ways  of  investment,  which  they  are  at  no  loss  to  discover ;  for 
the  moment  they  are  known  to  be  possessed  of  loose  funds,  they 
seldom  have  to  wait  for  propositions  for  the  employment  of  them ; 
whereas  the  proprietors  of  lands  let  out  to  farm,  and  individuals  that 
live  upon  fixed  income,  or  the  wages  of  their  personal  labour,  have 
not  equal  facility  in  the  advantageous  disposal  of  their  savings,  and 
nan  seldom  invest  them  till  they  amount  to  a  good  round  sum. 
Many  savings  are  therefore  consumed,  that  might  otherwise  have 
swelled  the  capitals  of  individuals,  and  consequently  of  the  nation  at 
large.  Banks  and  associations,  whose  object  is  to  receive,  collect, 
and  turn  to  profit  the  small  savings  of  individuals,  are  consequently 
very  favourable  to  the  multiplication  of  capital,  whenever  they  ^re 
ocifbctly  secure. 


CHAP.  XI.  ON  PRODUCTION.  113 

The  increase  of  capital  is  naturally  slow  of  progress :  for  it  can 
never  take  place  without  actual  production  of  value,  and  the  creation 
of  value  is  the  work  of  time  and  labour,  besides  other  ingredients.* 
Since  the  producers  are  compelled  to  consume  values  all  the  while 
they  are  engaged  in  the  creation  of  fresh  ones,  the  utmost  they  can 
accumulate,  that  is  to  say,  add  to  reproductive  capital,  is  the  value 
they  produce  beyond  what  they  consume;  and  the  sum  of  this  sur- 
plus is  all  the  additional  wealth  that  the  public  or  individuals  can 
acquire.  The  more  values  are  saved  arid  reproductively  employed 
in  the  year,  the  more  rapid  is  the  national  progress  towards  pros- 
perity. Its  capital  is  swelled,  a  larger  quantity  of  industry  is  set  in 
motion,  and  saving  becomes  more  and  more  practicable,  because  the 
additional  capital  and  industry  are  additional  means  of  production. 

Every  saving  or  increase  of  capital  lays  the  groundwork  of  a 
perpetual  annual  profit,  not  only  to  the  saver  himself,  but  likewise  to 
all  those  whose  industry  is  set  in  motion  by  this  item  of  new  capital. 
It  is  for  this  reason  that  the  celebrated  Adam  Smith  likens  the  frugal 
man,  who  enlarges  his  productive  capital  but  in  a  solitary  instance, 
to  the  founder  of  an  almshouse  for  the  perpetual  support  of  a  body 
of  labouring  persons  upon  the  fruits  of  their  own  labour ;  and  on  the 
other  hand,  compares  the  prodigal  that  encroaches  upon  his  capita], 
to  the  roguish  steward  that  should  squander  the  funds  of  a  charitable 
institution,  and  leave  destitute,  not  merely  those  that  derived  present 
subsistence  from  it,  but  likewise  all  who  might  derive  it  hereafter. 
He  pronounces,  without  reserve,  every  prodigal  to  be  a  public  pest, 
and  every  careful  arid  frugal  person  to  be  a  benefactor  of  society,  f 

It  is  fortunate,  that  self-interest  is  always  on  the  watch  to  preserve 
the  capital  of  individuals ;  and  that  capital  can  at  no  time  be  with- 
drawn from  productive  employment,  without  a  proportionate  loss  of 
revenue. 

Smith  is  of  opinion,  that,  in  every  country,  the  profusion  and  igno- 
rance of  individuals  and  of  the  public  authorities,  is  more  than  com- 
pensated by  the  prevalent  frugality  of  the  people  at  large,  and  by 

*The  savings  of  a  rich  contractor,  of  a  swindler  or  cheat,  of  a  royal  favourite, 
saturated  with  grants,  pensions,  and  unmerited  emoluments,  are  actual  accumu- 
lations of  capital,  and  are  sometimes  made  with  facility  enough.  But  the  values 
thus  amassed  by  a  privileged  few,  are,  in  reality,  the  product  of  the  labour, 
capital,  and  Jand,  of  numbers,  who  might  themselves  have  made  the  saving,  and 
turned  it  to  their  own  account,  but  for  the  spoliation  of  injustice,  fraud,  or  vio- 
lence. 

f  Wealth  of  Nations,  b.  ii.  c.  3.  Lord  Lauderdale,  in  a  work  entitled, "  Enquiry 
•.nto  the  Nature  and  Origin  of  Public  Wealth,"  has  proved,  to  his  own  conviction, 
/n  opposition  to  Smith,  that  the  accumulation  of  capital  is  adverse  to  the  increase 
of  wealth  :  grounding  his  argument  on  the  position  that  such  accumulation  with- 
draws from  circulation  values  which  would  be  serviceable  to  industry.  But  this 
position  is  untenable.  Neither  productive  capital,  nor  the  additions  made  to  it, 
Are  withdrawn  from  circulation  :  otherwise  they  would  remain  inactive,  and  yield 
no  profit  whatever.  On  the  contrary,  the  adventurer  in  industry,  who  makes 
use  of  it,  employs,  disposes  of,  and  wholly  consumes  it,  but  in  a  way  that  re- 
produces it,  and  that  with  profit.  I  have  noted  this  error  of  his  lordship,  because 
it  has  been  made  the  basis  of  other  works  on  political  economy,  which  abound 
in  false  conclusions,  having  set  out  on  this  false  principle. 
10*  P 


114  ON  PRODUCTION.  BOOB  L 

their  careful  atttention  to  their  own  interests.*  At  least  it  seems 
undeniable,  that  almost  all  the  nations  of  Europe  are  at  this  moment 
advancing  in  opulence ;  which  could  not  be  the  case,  unless  each  of 
them,  taken  in  the  aggregate,  produced  more  than  it  consumed 
unproductively.f  Even  the  revolutions  of  modern  times  appear  to 
have  been  rather  favourable  than  otherwise  to  the  progress  of  opu- 
lence ;  for  they  are  no  longer,  as  in  ancient  days,  followed  by  con- 
tinued hostile  invasion,  or  universal  and  protracted  pillage ;  whereas, 
on  the  other  hand,  they  have  commonly  overthrown  the  barriers  of 
prejudice,  and  opened  a  wider  field  for  talent  and  enterprise.  But 
it  is  still  a  question,  whether  this  frugality,  which  Smith  gives  indi- 
viduals credit  for,  be  not,  in  the  most  numerous  classes  of  society,  a 
forced  consequence  of  a  vicious  political  organization.  Is  it  true, 
that  those  classes  receive  their  fair  proportion  of  the  gross  produce, 
in  return  for  their  productive  exertions?  How  many  individuals 
live  in  constant  penury,  in  the  countries  considered  as  the  most 
wealthy !  How  many  families  are  there,  both  in  town  and  country, 
whose  whole  existence  is  a  succession  of  privations ;  who,  with  every 
thing  around  them  to  awaken  their  desires,  are  reduced  to  the  satis- 
faction of  the  very  lowest  wants,  as  if  they  lived  in  an  age  of  the 
grossest  barbarism  and  national  poverty ! 

Thus  I  am  forced  to  infer,  that,  though  unquestionably  there  is  an 
annual  saving  of  produce  in  almost  all  the  nations  of  Europe,  this 
saving  is  extorted  much  more  commonly  from  urgent  and  natural 
wants,  than  from  the  consumption  of  superfluities,  to  which  policy 
and  humanity  would  hope  to  trace  it.  Whence  arises  a  strong  sus- 
picion of  some  radical  defect  in  the  policy  and  internal  economical 
systems  of  most  of  their  governments. 

Again,  Smith  thinks  that  the  moderns  are  indebted  for  their  com- 
parative opulence,  rather  to  the  prevalence  of  individual  frugality, 

*  Wealth  of  Nations,  b.  ii.  c.  3. 

f  Except  during  the  continuance  of  ruinous  wars,  or  excessive  public  extra- 
vagance, such  as  occured  in  France  under  the  domination  of  Napoleon.  It  can- 
not, be  doubted,  that,  at  that  disastrous  period  of  her  history,  even  in  the  moments 
of  her  most  brilliant  military  successes,  the  amount  of  capital  dilapidated  exceed- 
ed the  aggregate  of  savings.  Requisitions  and  the  havoc  of  war,  in  addition  to 
the  compulsory  expenditure  of  individuals,  and  the  pressure  of  exorbitant  taxa- 
tion, must  unquestionably  have  destroyed  more  values  than  the  exertions  of 
individual  economy  could  devote  to  reproductive  investment.  This  sovereign, 
wholly  ignorant  of  political  economy  himself,  and  consequently  affecting  to 
despise  its  suggestions,  encouraged  his  courtiers,  like  himself,  to  squander  the 
enormous  revenues  derived  from  his  favour,  in  the  apprehension  that  wealth 
might  make  them  independent.  (1) 

(1)  [We  are  told  by  Dr.  Bowring  and  Mr.  Villiers,  in  their  valuable  report  on 
the  Commercial  Relations  between  France  and  Great  Britain,  published  during 
the  present  year  (1834),  that  the  best  authorities  agree  in  declaring  that  the 
national  riches  of  France  were  greatly  diminished  by  the  Imperial  Regime,  and, 
probably,  a  much  larger  amount  was  sacrificed  in  increased  prices  and  diminish- 
ed trade  than  was  lost  by  the  more  direct  operation  of  Napoleon's  policy.] 

AMERICAN  EDITOR. 


CHAP.  XL  ON  PRODUCTION.  115 

than  to  the  enlargement  of  productive  power.  I  admit,  that  some 
absurd  kinds  of  profusion  are  more  rare  now-a-days  than  formerly  ;* 
but  it  should  be  recollected,  that  such  profusion  can  never  be  prac- 
tised, except  by  a  very  small  number  of  persons ;  and  if  we  take 
the  pains  to  consider  how  widely  the  enjoyment  of  a  more  abundant 
and  varied  consumption  is  diffused,  particularly  among  the  middle 
classes  of  society,  I  think  it  will  be  found,  that  consumption  and  fru- 
gality have  increased  both  together;  for  they  are  by  no  means  incom- 
patible. How  many  concerns  are  there  in  every  branch  of  industry, 
that,  in  times  of  prosperity,  yield  enough  produce  to  the  adventurers 
to  enable  them  to  enlarge  both  their  expenses  and  their  savings? 
What  is  true  of  one  particular  concern,  may  possibly  be  true  of  the 
national  production  in  the  aggregate.  The  wealth  of  France  was 
progressively  increasing  during  the  first  forty  years  of  the  reign  of 
Louis  XIV.,  in  spite  of  the  profusion,  public  and  private,  that  the 
splendour  of  the  court  occasioned.  The  stimulus  given  to  produc- 
tion by  Colbert,  multiplied  her  resources  faster  than  the  court  squan- 
dered them.  Some  people  supposed,  that  this  very  prodigality  was 
the  cause  of  their  multiplication ;  the  gross  fallacy  of  which  notion 
is  demonstrated  by  the  circumstance,  that  after  the  death  of  that 
minister,  the  extravagancies  of  the  court  continuing  at  the  same  rate, 
and  the  progress  of  production  being  unable  to  keep  pace  with  them, 
the  kingdom  was  reduced  to  an  alarming  state  of  exhaustion.  The 
close  of  that  reign  was  the  most  gloomy  that  can  be  imagined. 

After  the  death  of  Louis  XIV.,  the  public  and  private  expendi- 
ture of  France  have  been  still  further  increasing  ;f  and  to  me  it  ap- 

*It  is  not,  however,  to  be  supposed,  that  the  internal  economy  of  ancient  and 
of  modern  states  is  so  widely  different  as  some  may  be  led  to  imagine.  There 
is  a  striking  similarity  between  the  rise  and  fall  of  the  opulent  cities  of  Tyre, 
Carthage,  and  Alexandria,  and  those  of  the  Venetian,  Florentine,  Genoese,  and 
Dutch  republics.  The  same  cause  must  ever  be  attended  with  the  same  effect. 
We  read  of  the  wonderful  riches  of  Croesus,  king  of  Lydia,  even  before  his 
conquest  of  some  neighbouring  states :  whence  we  may  infer,  that  the  Lydians 
were  an  industrious  and  frugal  people ;  for  a  king  can  draw  his  resources  solely 
from  his  subjects.  The  dry  study  of  political  economy  would  lead  to  this  infer- 
ence ;  but  it  happens  to  be  also  confirmed  by  the  historical  testimony  of  Justin, 
who  calls  the  Lydians  a  people  once  powerful  in  the  resources  of  industry ;  (gens 
industrid  quondam  potens  ;)  and  gives  a  notion  of  their  enterprising  character, 
when  he  tells  us  that  Cyrus  did  not  complete  their  subjugation,  until  he  had 
habituated  them  to  indolence,  gaming  and  debauchery.  (Jussique  cauponias  et 
ludicras  artes  et  lenocinia  exercere.)  It  is  clear,  therefore,  that  they  must  have 
before  been  possessed  of  the  opposite  qualities.  Had  Crcesus  not  taken  a  turn 
for  pomp  and  military  renown,  he  would  probably  have  remained  a  powerful 
monarch,  instead  of  ending  his  days  in  misfortune.  The  art  of  connecting  cause 
with  effect,  and  the  study  of  political  economy,  are  probably  as  conducive  to  the 
personal  welfare  of  kings,  as  to  that  of  their  subjects. 

f  This  increase  of  expenditure  has  not  been  altogether  nominal,  and  consequeu 
tial  upon  the  reduction  in  the  standard  of  the  silver  coinage  of  France  ;  a  greater 
quantity  and  variety  of  products  were  consumed,  and  those  of  a  better  and  more 
expensive  quality.  And  though  refined  silver  is  now  intrinsically  worth  nearly 
as  much  as  in  the  days  of  Louis  XIV.,  since  the  same  weight  of  silver  is^  given 
for  the  same  quantity  of  wheat;  yet  the  same  ranks  of  society  now  actually  ex- 
pend more  silver  in  weight  as  well  as  in  denomination. 


116  ON  PRODUCTION.  BOOK  I. 

pears  indisputable,  that  her  national  wealth  has  advanced  likewise : 
Smith  himself  admits  that  it  did ;  and  what  is  true  of  France  is  so  of 
most  of  the  other  states  of  Europe  in  some  degree  or  other. 

Turgot*  falls  in  with  Smith's  opinion.  He  expresses  his  belief, 
that  frugality  is  more  generally  prevalent  now  than  in  former  times, 
and  gives  the  following  reasons :  that,  in  most  European  countries, 
the  interest  of  money  was,  on  the  average,  lower  than  it  had  ever 
before  been,  a  clear  proof  of  the  greater  abundance  of  capita] ;  there- 
fore, that  greater  frugality  must  have  been  exerted  in  the  accumula- 
tion of  that  capital  than  at  any  former  period ;  and,  certainly,  the 
low  rate  of  interest  proves  the  existence  of  more  abundant  capital : 
but  it  proves  nothing  with  regard  to  the  manner  of  its  acquirement 
in  fact,  it  may  have  been  acquired  just  as  well  by  enlarged  produc- 
tion as  by  greater  frugality,  as  I  have  just  been  demonstrating. 

However,  I  am  far  from  denying,  that  in  many  particulars,  the 
moderns  have  improved  the  art  of  saving  as  well  as  that  of  producing. 
A  man  is  not  easily  satisfied  with  less  gratifications  than  he  has  been 
accustomed  to:  but  there  are  many  which  he  has  learnt  to  procure 
at  a  cheaper  rate.  For  instance,  what  can  be  more  beautiful.than  the 
coloured  furniture  papers  that  adorn  the  walls  of  our  apartments, 
combining  the  grace  of  design  with  the  freshness  of  colouring  ?  For- 
merly, many  of  those  classes  of  society  that  now  make  use  of  paper 
hangings,  were  content  with  whitewashed  walls,  or  a  coarse  ill-exe- 
cuted tapestry,  infinitely  dearer  than  the  modern  paperings.  By  the 
recent  discovery  of  the  efficacy  of  sulphuric  acid  in  destroying  the 
mucilaginous  articles  of  vegetable  oils,  they  have  been  rendered 
serviceable  in  lamps  on  the  Argand  principle  of  a  double  current  of 
air,  which  before  could  only  be  lighted  with  fish  oil,  twice  or  thrice 
as  dear.  This  discovery  has  of  itself  placed  the  use  of  those  lamps, 
and  the  fine  light  they  give,  within  reach  of  almost  every  class.f 

For  this  improvement  in  frugality,  we  are  indebted  to  the  advances 
of  industry,  which  has,  on  the  one  hand,  discovered  a  greater  number 
of  economical  processes ;  and,  on  the  other,  everywhere  solicited 
the  loan  of  capital,  and  tempted  the  holders  of  it,  great  or  small,  by 
better  terms  and  greater  security.  In  times  when  little  industry 
existed,  capital,  being  unprofitable,  was  seldom  in  any  other  shape 
than  that  of  a  hoard  of  specie  locked  up  in  a  strong  box,  or  buried  in 
the  earth  as  a  reserve  against  emergency :  however  considerable  in 
amount,  it  yielded  no  sort  of  benefit  whatever,  being  in  fact  little 
else  than  a  mere  precautionary  deposit,  great  or  small.  But  the 
moment  that  this  hoard  was  found  capable  of  yielding  a  profit  pro- 
portionate to  its  magnitude,  its  possessor  had  a  double  motive  for 
increasing  it,  and  that  not  of  remote  or  precautionary,  but  of  actual, 

*  Reflex  sur  la  Form,  et  la  Distrib.  de.s  Rich.  §  81. 

(•  It  is  to  be  feared,  that  taxation  will  ultimately  deprive  the  consumer  of  the 
ndvantage  of  sucli  improvements.  The  increase  of  the  internal  taxes  (tlroits 
reimiii),  of  the  stamps  on  patents,  of  the  taxes  and  impediments  affecting  the 
internal  transport  of  commodities,  have  already  brought  the  price  of  these  vege- 
oils  almost  to  a  par  with  the  article  they  had  so  beneficially  supplanted 


CHAP.  XL  ON  PRODUCTION.  117 

immediate  benefit;  since  the  profit  yielded  by  the  capital  might, 
without  the  least  diminution  of  it,  be  consumed  and  procure  addi- 
tional gratifications.  Thenceforward  it  became  an  object  of  greater 
and  more  general  solicitude  than  before,  in  those  that  had  none  to 
create,  and  in  those  that  had  one  to  augment,  productive  capital;  and 
a  capital  bearing  interest  began  to  be  regarded  as  a  property  equally 
lucrative,  and  sometimes  equally  substantial  with  land  yielding  rent. 
To  such  as  regard  the  accumulation  of  capital  as  an  evil,  insomuch  as 
it  tends  to  aggravate  the  inequality  of  human  fortune,  I  would  sug- 
gest, that,  if  accumulation  has  a  constant  tendency  to  the  multiplying 
of  large  fortunes,  the  course  of  nature  has  an  equal  tendency  to  divide 
them  again.  A  man,  whose  life  has  been  spent  in  augmenting  his 
own  capital  and  that  of  his  country,  must  die  at  last,  and  the  succes- 
sion rarely  devolves  upon  a  sole  heir  or  legatee,  except  where  the 
national  laws  sanction  entails  and  the  right  of  primogeniture.  In 
countries  exempt  from  the  baneful  influence  of  such  institutions, 
where  nature  is  left  to  its  own  free  and  beneficent  action,  wealth  is 
naturally  diffused  by  subdivision  through  all  the  ramifications  of  the 
social  tree,  carrying  health  and  life  to  the  furthest  extremities.* 
The  total  capital  of  the  nation  is  enlarged  at  the  same  time  that  the 
capital  of  individuals  is  subdivided. 

Thus,  the  growing  wealth  of  an  individual,  when  honestly  acquired 
and  reproductively  employed,  far  from  being  viewed  with  jealous 
eyes,  ought  to  be  hailed  as  a  source  of  general  prosperity.  I  say 
honestly  acquired,  because  a  fortune  amassed  by  rapine  or  extortion 
is  no  addition  to  the  national  stock ;  it  is  rather  a  portion  of  capital 
transferred  from  the  hands  of  one  man,  where  it  already  existed,  to 
those  of  another,  who  has  exerted  no  productive  industry.  On  the 
contrary,  it  is  but  too  common,  that  wealth  ill-gotten  is  ill-spent  also. 

The  faculty  of  amassing  capital,  or,  in  other  words,  value,  I  appre- 
hend to  be  one  cause  of  the  vast  superiority  of  man  over  the  brute 
creation.  Capital,  taken  in  the  aggregate,  is  a  powerful  engine  con- 
signed to  the  use  of  man  alone.  He  can  direct  towards  any  one 
channel  of  employment  the  successive  accumulations  of  many  gene- 
rations. Other  animals  can  command,  at  most,  no  more  than  their 

*  It  is  to  be  regretted  that  people  should  be  so  little  attentive  to  merit  in  their 
testamentary  dispositions.  There  is  always  a  degree  of  discredit  thrown  upon 
the  memory  of  a  testator,  by  his  bounty  to  an  unworthy  object ;  and,  on  the  con- 
trary, nothing  endears  him  more  to  the  survivors  than  a  bequest  dictated  by  public 
spirit,  or  the  love  of  private  virtue.  The  foundation  of  a  hospital,1  &f  an  establish- 
ment for  the  education  of  the  poor,  of  a  perpetual  premium  for  good  actions,  or  a 
bequest  to  a  writer  of  eminent  merit,  extends  the  influence  of  the  wealthy  beyond 
the  limits  of  mortality,  and  enrols  his  name  in  the  records  of  honour,  (a) 

(a)  This  laudable  ambition  is  always  proportionate  to  the  wealth,  the  civil 
liberty,  and  the  intelligence  of  a  nation.  In  England,  scarcely  a  year  passes 
over  our  heads  without  more  than  one  instance  of  useful  aiid  extensive  muni- 
ficence. The  bequests  to  the  elder  Pitt,  to  Wilberforce,  and  other  public  men, 
the  frequent  foundations  and  enlargements  of  institutions  of  relief  or  education, 
reflect  equal  honour  on  the  character  of  the  nation,  and  the  memory  of  the  iuJU 
vidnals.  T. 


US  ON  PRODUCTION.  BOOK  L 

L   % 

respective  individual  accumulations,  scraped  together  in  the  course 
of  a  lew  days,  or  a  season  at  the  utmost,  which  can  never  amount 
to  auy  thing  considerable :  so  that,  granting  them  a  degree  of  intel- 
ligence they  do  not  seem  possessed  of,  that  intelligence  would  yet 
remain  ineffectual,  for  want  of  the  materials  to  set  it  in  motion. 

Moreover,  it  may  be  remarked,  that  the  powers  of  man,  resulting 
from  the  faculty  of  amassing  capital,  are  absolutely  indefinable; 
because  there  is  no  assignable  limit  to  the  capital  he  may  accumu- 
late, with  the  aid  of  time,  industry,  and  frugality 


CHAPTER  XII. 

OF  UNPRODUCTIVE  CAPITAL 

WE  have  seen  above,  that  values  once  produced  may  be  devoted-, 
either  to  the  satisfaction  of  the  wants  of  those  who  have  acquired 
them,  or  to  a  further  act  of  production.  They  may  also  be  with- 
drawn both  from  unproductive  consumption  and  from  reproductive 
employment,  and  remain  buried  or  concealed. 

The  owner  of  values,  in  so  disposing  of  them,  not  only  deprives 
himself  of  the  self-gratification  he  might  have  derived  from  their 
consumption,  but  also  of  the  advantage  he  might  draw  from  the 
productive  agency  of  the  value  hoarded.  He  furthermore  withholds 
from  industry  the  profits  it  might  make  by  the  employment  of  that 
value. 

Amongst  abundance  of  other  causes  of  the  misery  and  weakness 
of  the  countries  subjected  to  the  Ottoman  dominion,  it  cannot  be 
doubted,  that  one  of  the  principal  is,  the  vast  quantity  of  capital 
remaining  in  a  state  of  inactivity.  The  general  distrust  and  uncer- 
tainty of  the  future  induce  people  of  every  rank,  from  the  peasant 
to  the  pacha,  to  withdraw  a.part  of  their  property  from  the  greedy 
eyes  of  power:  and  value  can  never  be  invisible,  without  being  inac- 
tive. This  misfortune  is  common  to  all  countries,  where  the  govern- 
ment is  arbitrary,  though  in  different  degrees  proportionate  to  the 
severity  of  despotism.  For  the  same  reason,  during  the  violence  of 
political  convulsions,  there  is  always  a  sensible  contraction  of  capital, 
a  stagnation'of  industry,  a  disappearance  of  profit,  and  a  general  de- 
pression while  the  alarm  continues :  and,  on  the  contrary,  an  instan- 
taneous energy  and  activity  highly  favourable  to  public  prosperity, 
upon  the  re-establishment  of  confidence.  The  saints  and  madonnas 
of  superstitious  nations,  the  splendid  pageantry  and  richly  decorated 
Vttols  of  Asiatic  worship,  gave  life  to  no  agricultural  or  manufacturing 
enterprise.  The  riches  of  the  fane  and  the  time  lost  in  adoration 
*vould  really  purchase  the  blessings  that  barren  prayers  can  never 
oxtort  from  the  object  of  idolatry.  There  is  a  great  deal  of  inert 
capital  in  countries,  where  the  national  habits  lead  to  the  extended 


CHAP.  XIII.  ON  PRODUCTION.  119 

use  of  the  precious  metals  in  furniture,  clothes,  and  decorations. 
The  silly  admiration  bestowed  by  the  lower  orders  on  the  display 
of  such  idle  and  unproductive  finery,  is  hostile  to  their  own  interests. 
For  the  opulent  individual,  who  vests  20,000  dollars,  in  gilding, 
plate,  and  the  splendour  of  his  establishment,  has  it  not  to  lay  out  at 
interest,  and  withdraws  it  from  the  support  of  industry  of  any  kind. 
The  nation  loses  the  annual  revenue  of  so  much  capital,  and  the 
annual  profit  of  the  industry  it  might  have  kept  in  activity. 

Hitherto  we  have  been  considering  that  kind  of  value  only,  which 
is  capable,  after  its  creation,  of  being,  as  it  were,  incorporated  with 
matter,  and  preserved  for  a  longer  or  shorter  period.  But  all  the 
values  producible  by  human  industry,  have  not  this  quality.  Some 
there  are,  which  must  have  reality,  because  they  are  in  high  estima- 
tion, and  purchased  by  the  exchange  of  costly  and  durable  products, 
which  nevertheless  have  themselves  no  durability,  but  perish  the 
moment  of  their  production.  This  class  of  values  I  shall  define  in 
the  ensuing  chapter,  and  denominate  immaterial  products.* 


CHAPTER  XIII. 

OF  IMMATERIAL  PRODUCTS,  OR  VALUES  CONSUMED  AT  THE  MOMENT  OS- 
PRODUCTION. 

A  PHYSICIAN  goes  to  visit  a  sick  person,  observes  the  symptoms 
of  disease,  prescribes  a  remedy,  and  takes  his  leave  without  deposit- 
ing any  producj,  that  the  invalid  or  his  family  can  transfer  to  a  third 
person,  or  even  keep  for  the  consumption  of  a  future  day. 

Has  the  industry  of  the  physician  been  unproductive  ?  Who  can 
for  a  moment  suppose  so  ?  The  patient's  life  has  been  saved  perhaps. 
Was  this  product  incapable  of  becoming  an  object  of  barter  ?  By 
no  means :  the  physician's  advice  has  been  exchanged  for  his  fee ; 
buj  the  want  of  this  advice  ceased  the  moment  it  was  given.  The 
act  of  giving  was  its  production,  of  hearing  its  consumption,  and 
the  consumption  and  production  were  simultaneous. 

This  is  what  I  call  an  immaterial  product. 

The  industry  of  a  musician  or  an  actor  yields  a  product  of  the 
same  kind:  it  gives  one  an  amusement,  a  pleasure  one  can  not  pos- 
sibly retain  or  preserve  for  future  consumption,  or  as  the  object  of 
barter  for  other  enjoyments.  This  pleasure  has  its  price,  it  is  true . 

*  It  was  my  first  intention  to  call  these  perishable  products,  but  this  'erm 
would  be  equally  applicable  to  products  of  a  material  kind.  Intransferahle. 
would  be  equally  incorrect,  for  this  class  of  products  does  pass  from  the  pro- 
ducer to  the  consumer.  The  word  transient  does  not  exclude  all  idea  of  dura 
lion  whatever,  neither  does  the  word  momentary. 


120  ON  PRODUCTION.  BOOK  I 

but  it  has  no  further  existence,  except  perhaps  in  the  memory,  ana 
no  exchangeable  value,  after  the  instant  of  its  production. 

Smith  will  not  allow  the  name  of  products  to  the  results  of  these 
branches  of  industry.  Labour  so  bestowed  he  calls  unproductive; 
an  error  he  was  led  into  by  his  definition  of  wealth,  which  he  defines 
to  consist  of  things  bearing  a  value  capable  of  being  preserved, 
instead  of  extending  the  name  to  all  things  bearing  exchangeable 
value:  consequently,  excluding  products  consumed  as  soon  as  created. 
The  industry  of  the  physician,  however,  as  well  as  that  of  the  public 
functionary,  the  advocate  or  the  judge,  which  are  all  of  them  of  the 
same  class,  satisfies  wants  of  so  essential  a  nature,  that  without  those 
professions  no  society  could  exist.  Are  not,  then,  the  fruits  of  their 
labour  real?  They  are  so  far  so,  as  to  be  purchased  at  the  price  of 
other  and  material  products,  which  Smith  allows  to  be  wealth ;  and 
by  the  repetition  of  this  kind  of  barter,  the  producers  of  immaterial 
products  acquire  fortunes.* 

To  descend  to  items  of  pure  amusement,  it  cannot  be  denied,  that 
the  representation  of  a  good  comedy  gives  as  solid  a  pleasure  as  a 
box  of  comfits,  or  a  discharge  of  fire-works,  which  are  products, 
even  within  Smith's  definition.  Nor  can  I  discover  any  sound  rea- 
son, why  th<;  talent  of  the  painter  should  be  deemed  productive, 
and  not  the  lalent  of  the  musician,  f 

Smith  himself  has  exposed  the  error  of  the  economist  in  confining 
the  term,  wealth,  to  the  mere  value  of  the  raw  material  contained 
in  each  product ;  he  advanced  a  great  step  in  political  economy,  by 
demonstrating  wealth  to  consist  of  the  raw  material,  plus  the  value 
added  to  it  by  industry;  but,  having  gone  so  far  as  to  promote  to 
the  rank  of  wealth  an  abstract  commodity,  value,  why  reckon  it  as 
nothing,  however  real  and  exchangeable,  when  not  incorporated  in 
matter  ?  This  is  the  more  surprising,  because  he  went  so  far  as  to 
treat  of  labour,  abstracted  from  the  matter  wherein-it  is  employed ; 
to  examine  the  causes  which  operate  upon  and  influence  its  value; 
and  even  to  propose  that  value  as  the  safest  and  least  variable  mea- 
sure of  all  other  values.J 

The  nature  of  immaterial  products  makes  it  impossible  ever  to 
accumulate  them,  so  as  to  render  them  a  part  of  the  national  capital. 
A  people  containing  a  host  of  musicians,  priests,  and  public  func- 
tionaries might  be  abundantly  amused,  well  versed  in  religious 
doctrines,  and  admirably  governed ;  but  that  is  all.  Its  capital 
would  receive  no  direct  accession  from  the  total  labour  of  all  these 
individuals,  though  industrious  enough  in  their  respective  vocations, 
because  their  products  would  be  consumed  as  fast  as  produced. 

*  Wherefore  de  Verri  is  wrong  in  asserting,  that  the  occupations  of  the  sove- 
leign,  the  magistrate,  the  soldier,  and  the  priest,  do  not  fall  within  the  cognizance 
ef  political  economy.  (Meditazioni  sulla  Economic,  Politico,  §  24.) 

f  This  error  has  already  been  pointed  out  by  M.  Germain  Gamier,  in  the  notes 
to  his  French  translation  of  Smith. 

\  Some  writers,  who  have  probably  taken  but  a  cursory  view  of  the  positions 
here  laid  down,  still  persist  in  setting  down  the  producers  of  immaterial  product* 


CHAP.  XIII.  ON  PRODUCTION. 


121 


Consequently,  nothing  is  gained  on  the  score  of  public  prosperity, 
by  ingeniously  creating  an  unnatural  demand  for  the  labour  of  any 
of  these  professions ;  the  labour  diverted  into  that  channel  of  produc- 
tion can  not  be  increased,  without  increasing  the  consumption  also. 
If  this  consumption  yield  a  gratification,  then  indeed  we  may  console 
ourselves  for  the  sacrifice ;  but  when  that  consumption  is  itself  an 
evil,  it  must  be  confessed  the  system  which  causes  it  is  deplorable 
enough. 

This  occurs  in  practice,  whenever  legislation  is  too  complicated. 
The  study  of  the  law,  becoming  more  intricate  and  tedious,  occupies 
more  persons,  whose  labour  must  likewise  be  better  paid.  What  does 
society  gain  by  this  1  Are  the  respective  rights  of  its  members-  bet- 
ter protected  1  Undoubtedly  not :  the  intricacy  of  law,  on  the  con- 
trary, holds  out  a  great  encouragement  to  fraud,  by  multiplying  the 
chances  of  evasion,  and  very  rarely  adds  to  the  solidity  of  title  or  of 
right.  The  only  advantage  is,  the  greater  frequency  and  duration  of 
suits.  The  same  reasoning  applies  to  superfluous  offices  in  the  pub- 
lic administration.  To  create  an  office  for  the  administration  of  what 
ought  to  be  left  to  itself,  is  to  do  an  injury  to  the  subject  in  the 
first  instance,  and  make  him  pay  for  it  afterwards  as  if  it  were  a 
benefit.* 

Wherefore  it  is  impossible  to  admit  the  inference  off  M.  Gamier, 
that  because  the  labour  of  physicians,  lawyers,  and  the  like,  is  pro- 
ductive, therefore  a  nation  gains  as  much  by  the  multiplication  of  tha 
class  of  labour  as  of  any  other.  This  would  be  the  same  as  bestow- 
ing upon  a  material  product  more  manual  labour  than  is  necessary 
for  its  completion.  The  labour  productive  of  immaterial  products, 
like  every  other  labour,  is  productive  so  far  only  as  it  augments  the 
utility,  and  thereby  the  value  of  a  product :  beyond  this  point  it  is  a 
purely  unproductive  exertion.  To  render  the  laws  intricate  pur- 
posely to  give  lawyers  full  business  in  expounding  them,  would  be 
equally  absurd,  as  to  spread  a  disease  that  doctors  may  find  practice. 

Immaterial  products  are  the  fruittof  human  industry,  in  which 
term  we  have  comprised  every  kind  of  productive  labour.  It  is  not 
so  .easy  to  understand  how  they  can  at  the  same  time  be  lite  fruit  of 
capital.  Yet  these  products  are  for  the  most  part  the  result  of  some 
talent  or  other,  which  always  implies  previous  study  ;  and  no  study 
can  take  place  without  advances  of  capital. 

Before  the  advice  of  the  physician  can  be  given  or  taken,  thephy- 

amongst  the  unproductive  labourers.  But  it  is  vain  to  struggle  against  the 
nature  of  things.  Those  at  all  conversant  with  the  science  of  political  economy, 
are  compelled  to  yield  involuntary  homage  to  its  principles.  Thus  Sismondi, 
after  having  spoken  of  the  values  expended  in  the  wages  of  unproductive 
labourers,  goes  on  to  say,  "  Ce  sont  des  Consummations  rapides  qui  suivent  imme- 
diatement  la  production,"  Nouv.  Princ.  torn.  ii.  p.  203;  admitting  a  production 
oy  those  he  had  pronounced  to  be  unproductive ! 

*  What,  then,  are  we  to  think  of  those  who  assert  in  substance,  if  not  in 
words,  that  such  a  formality  or  such  a  tax  is  productive  of  one  benefit  at  least, 
namely,  the  maintenance  of  such  or  such  an  establishment  of  clerks  and  officers  * 

|  Traduction  de  Smith,  note  20. 

11  Q 


122  ON  PRODUCTION.  BOOK  I. 

sician  or  his  relations  must  first  have  defrayed  the  charges  of  an  edu- 
cation of  many  years'  duration :  he  must  have  subsisted  \vhile  a  stu- 
dent; professors  must  have  been  paid;  books  purchased;  journeys 
perhaps  have  been  performed ;  all  which  implies  the  disbursement 
of  a  capital  previously  accumulated.*  So  likewise  the  lawyer's  opin- 
ion, the  musician's  song,  &c.  are  products,  that  can  never  be  raised 
without  the  concurrence  of  industry  and  capital.  Even  the  ability 
of  the  public  functionary  is  an  accumulated  capital.  It  requires  the 
same  kind  of  outlay,  for  the  education  of  a  civil  or  military  engineer, 
as  for  that  of  a  physician.  Indeed  we  may  take  it  for  granted,  that 
the  funds  expended  in  the  training  of  a  young  man  for  the  public 
service,  are  found  by  experience  to  be  a  fair  investment  of  capital, 
and  that  labour  of  this  description  is  well  paid ;  for  we  find  more 
applicants  than  offices  in  almost  every  branch  of  administration,  even 
in  countries  where  offices  are  unnecessarily  multiplied. 

The  industry  productive  of  immaterial  products  will  be  found  to 
go  through  exactly  the  same  process,  as,  in  the  analysis  made  in  the 
l/eginnirig  of  this  work,  we  have  shown  to  be  followed  by  industry 
in  general.  This  may  be  illustrated  by  an  example.  Before  an 
ordinary  song  can  be  executed,  the  arts  of  the  composer  and  the 
practical  musician  must  have  been  regular  and  distinct  callings ;  and 
the  best  mode  of  acquiring  skill  in  them  must  have  been  discovered ; 
this  is  the  department  of  the  man  of  science,  or  theorist.  The  appli- 
cation of  this  mode  and  of  this  art,  has  been  left  to  the  composer  and 
singer,  who  have  calculated,  the  one  in  composing  his  tune,  the  others 
in  the  execution  of  it,  that  it  would  afford  a  pleasure,  to  which  the 
audience  would  attach  some  value  or  other.  Finally,  the  execution 
is  the  concluding  operation  of  industry. 

There  are,  however,  some  immaterial  products,  with  respect  to 
which  the  two  first  operations  are  so  extremely  trifling,  that  one  may 
almost  account  them  as  nothing.  Of  this  description  is  the  service 
of  a  menial  domestic.  The  art  of  service  is  little  or  nothing,  and 
the  application  of  that  art  is  made  by  the  employer ;  so  that  nothing 
is  left  to  the  servant,  but  the  executive  business  of  service,  which  is 
the  last  and  lowest  of  industrious  operations. 

It  necessarily  follows,  that,  in  this  class  of  industry,  and  some  few 
others  practised  by  the  lowest  ranks  of  society,  that  of  the  porter  for 
instance,  or  of  the  prostitute,  &c.  &c. :  the  charge  of  training  being 
Httle  or  nothing,  the  products  may  be  looked  upon  not  only  as  the 
fruits  of  very  coarse  and  primitive  industry,  but  likewise  as  products, 
to  the  creation  of  which  capital  has  contributed  nothing ;  for  I  can 
not  think  the  expense  of  these  agents'  subsistence  from  infancy,  till 
the  age  of  emancipation  from  parental  care,  can  be  considered  as  a 

*  I  will  not  here  anticipate  the  investigation  of  the  profits  of  industry  and  ca- 
pital, but  confine  myself  to  observe,  en  passant,  that  capital  is  thrown  away  upon 
the  physician,  and  his  fees  improperly  limited,  unless,  besides  the  recompense  of 
his  actual  labour  and  talent,  (which  latter  is  a  natural  agent  gratuitously  given 
to  him,)  they  defray  the  interest  of  the  capital  expended  in  his  education,  and 
not  the  common  rate  of  interest,  but  calculated  at  the  rate  of  an  annuity. 


CHAP.  Xin.  ON  PRODUCTION.  123 

capital,  the  interest  of  which  is  paid  by  the  subsequent  profits.  I 
shall  give  my  reasons  for  this  opinion  when  I  come  to  speak  of 
wages.* 

The  pleasures  one  enjoys  at  the  price  of  any  kind  of  personal  exer- 
tion, are  immaterial  products,  consumed  at  the  instant  of  production 
by  the  very  person  that  has  created  them.  Of  this  description  are 
the  pleasures  derived  from  arts  studied  solely  for  self-amusement. 
In  learning  music,  a  man  devotes  to  that  study  some  small  capital, 
some  time  and  personal  labour ;  all  which  together  are  the  price 
paid  for  the  pleasure  of  singing  a  new  air  or  taking  part  in  a  concert. 

Gaming,  dancing,  and  field-sports,  are  labours  of  the  same  kind. 
The  amusement  derived  from  them  is  instantly  consumed  by  the 
persons  who  have  performed  them.  When  a  man  executes  a  paint- 
ing, or  makes  any  article  of  smith's  or  joiner's  work  for  his  amuse- 
ment, he  at  the  same  time  creates  a  durable  product  or  value,  and 
an  immaterial  product,  viz.  his  personal  amusementf 

In  speaking  of  capital,  we  have  seen,  that  part  of  it  is  devoted  to 
the  production  of  material  products,  and  part  remains  wholly  unpro- 
ductive. There  is  also  a  further  part  productive  of  utility  or  plea- 
sure, which,  can,  therefore,  be  reckoned  as  a  portion  neither  of  the 
capital  engaged  in  the  production  of  material  objects,  nor  of  that 
absolutely  inactive.  Under  this  head  may  be  comprised  dwelling- 
houses,  furniture  and  decorations,  that  are  an  addition  to  the  mere 
pleasures  of  life.  The  utility  they  afford  is  an  immaterial  product. 

When  a  young  couple  sets  up  house-keeping  for  the  first  time,  the 
plate  they  provide  themselves  with  cannot  be  considered  as  abso- 
lutely inactive  capital,  for  it  is  in  constant  domestic  use;  nor  can  it 
be  reckoned  as  capital  engaged  in  the  raising  of  material  products; 
for  it  leads  to  the  production  of  no  one  object  capable  of  being  re- 
served for  future  consumption ;  neither  is  it  an  object  of  annual  con 
sumption,  for  it  may  last,  perhaps,  for  their  joint  lives,  and  be  handed 
down  to  their  children ;  but  it  is  capital  productive  of  utility  and 
pleasure.  Indeed,  it  is  so  much  value  accumulated  or  in  other  words 
withdrawn  from  reproductive  consumption ;  consequently,  yielding 
neither  profit  nor  interest,  but  productive  of  some  degree  of  benefit 
or  utility,  which  is  gradually  consumed  and  incapable  of  being  real- 
ised, yet  it  is  possessed  of  real  and  positive  value,  since  it  is  occa- 

*  The  wages  of  the  mere  labourer  are  limited  to  the  bare  necessaries  of  life, 
without  which  his  agency  cannot  be  continued  and  renewed ;  there  is  no  surplus 
for  the  interest  on  capital.  But  the  subsistence  of  his  children,  until  old  enough 
to  earn  their  livelihood,  is  comprised  in  the  necessaries  of  the  labourer. 

t  An  indolent  and  inert  people  is  always  little  addicted  to  amusements  Result- 
ing from  the  exercise  of  personal  faculties.  Labour  is  attended  with  so  much 
pain  to  them,  as  very  few  pleasures  are  intense  enough  to  repay.  The  Turks 
think  us  mad  to  find  pleasure  in  the  violent  motions  of  the  dance;  without  re 
fleeting,  that  it  causes  to  us  infinitely  less  fatigue  than  to  themselves.  They 
prefer  pleasures  prepared  by  the  fatigue  of  others.  There  is,  perhaps,  as  much 
industry  expended  on  pleasures  in  Turkey  as  with  us;  but  it  is  exerted  in  genenu 
by  slaves,  who  do  not  participate  in  the  product. 


124  ON  PRODUCTION.  BOOK! 

sionally  the  object  of  purchase :  as  in  the  instance  of  the  rent  of  a 
house  or  the  hire  of  furniture,  and  the  like. 

Although  it  be  a  sad  mistake  of  personal  interest  to  vest  the  small- 
est particle  of  capital  in  a  manner  wholly  unproductive,  it  is  by  no 
means  so  to  lay  out,  in  a  way  productive  of  utility  or  amusement,  so 
much  as  may  be  not  disproportionate  to  the  circumstances  of  the 
individual.  There  is  a  regular  gradation  of  the  ratio  of  capital  so  vest- 
ed by  individuals  respectively,  from  the  rude  furniture  of  the  poor 
man's  hovel,  up  to  the  costly  ornaments  and  dazzling  jewels  of  the 
wealthy.  When  a  nation  is  rich,  the  poorest  family  in  it  possesses  a 
capital  of  this  kind,  not  indeed  of  any  great  amount,  but  still  enough 
to  satisfy  moderate  and  limited  desires.  The  prevalence  of  general 
wealth  in  a  community  is  more  strongly  indicated  by  meeting  uni- 
versally with  some  useful  and  agreeable  household  conveniences  in 
the  dwellings  of  the  inferior  ranks,  than  by  the  splendid  palaces  and 
costly  magnificence  of  a  few  favourites  of  fortune,  or  by  the  casual 
display  of  diamonds  and  finery  we  sometimes  see  brought  together 
in  a  large  city,  where  the  whole  wealth  of  the  place  is  often  exhibit- 
ed at  one  view,  at  a  fete  or  a  theatre  of  public  resort ;  but  which, 
after  all,  are  a  mere  trifle,  compared  with  the  aggregate  value  of 
the  household  articles  of  a  great  people. 

The  component  items  of  a  capital  producing  bare  utility  or  amuse- 
ment, are  liable  to  wear  and  tear,  though  in  a  very  slight  degree; 
and  if  that  wear  and  tear  be  not  made  good  out  of  the  savings  of 
annual  revenue,  there  is  a  gradual  dissipation  and  reduction  of  capital. 

This  remark  may  appear  trifling ;  yet  how  many  people  think  they 
are  living  upon  their  revenue,  when  they  are  at  the  same  time  par- 
tially consuming  their  capital !  Suppose,  for  instance,  a  man  is  the 
proprietor  of  the  house  he  lives  in ;  if  the  house  be  calculated  to  last 
100  years,  and  have  cost  20,000  dollars  in  the  building,  it  costs  the 
proprietor  or  his  heirs  200  dollars  per  annum,  exclusive  of  the 
interest  upon  the  original  cost,  otherwise  the  whole  capital  will  be 
extinguished,  or  nearly  so,  by  the  end  of  100  years.  The  same  rea- 
soning is  applicable  to  every  other  item  of  capital  devoted  to  the 
production  of  utility  or  pleasure ;  to  a  sideboard,  a  jewel,  every  im- 
aginable object,  in  short,  that  comes  under  the  same  denomination. 

And,  vice  versd,  when  annual  revenue,  arising  from  whatever 
source,  is  encroached  upon  for  the  purpose  of  enlarging  the  capital 
devoted  to  the  production  of  useful  or  agreeable  objects,  there  is  an 
actual  increase  of  capital  and  of  fortune,  though  none  of  revenue. 

Capital  of  this  class,  like  all  other  capital,  without  exception,  is 
formed  by  the  partial  accumulations  of  annual  products.  There  is 
no  oth*er  way  of  acquiring  capital,  but  by  personal  accumulation,  or 
by  succession  to  accumulation  of  others.  Wherefore,  the  reader  is 
referred  on  this  head  to  Chap.  XI,  where  I  have  treated  of  the  accu- 
mulation of  capital. 

A  public  edifice,  a  bridge,  i  higtiwav ,  are  savings  or  accumulations 
of  revenue,  devoted  to  the  fonnatk.n  of  <»  capital,  whose  returns  art 
an  immaterial  product  consumed  by  the  public  at  large.  If  the  con 


CHAP.  XIII.  ON  PRODUCTION.  125 

struction  of  a  bridge  or  highway,  added  to  the  purchase  of  the 
ground  it  stands  upon,  have  cost  200,000  dollars,  the  use  the  public 
makes  of  it  may  be  estimated  to  cost  10,000  dollars  per  annum.* 

There  are  some  immaterial  products,  towards  which  the  land  is  a 
principal  contributor.  Such  is  the  pleasure  derived  from  a  park  or 
pleasure-garden.  The  pleasure  is  aflbrded  by  the  continual  and  daily 
agency  of  the  natural  object,  and  is  consumed  as  fast  as  produced.  A 
ground  yielding  pleasure  must,  therefore,  not  be  confounded  with 
ground  lying  waste  or  in  fallow.  Wherein  again  appears  the  anal- 
ogy of  land  to  capital,  of  which,  as  we  have  seen,  some  part  is  pro- 
ductive of  immaterial  products,  and  some  part  is  altogether  inactive. 

Gardens  and  pleasure-grounds  have  generally  cost  some  expense 
in  embellishment;  in  which  case,  capital  and  land  unite  their 
agency  to  yield  an  immaterial  product. 

Some  pleasure-grounds  yield  likewise  timber  and  pasturage :  these 
are  productive  of  both  classes  of  products.  The  old-fashioned  gar- 
dens in  France  yielded  no  material  product ;  those  of  modern  times 
are  somewhat  improved  in  this  particular,  and  would  be  more  so, 
if  culinary  herbs  and  fruit-trees  were  oftener  introduced.  Doubtless, 
it  would  be  harsh  to  find  fault  with  a  proprietor  in  easy  circumstances, 
for  appropriating  ^art  of  his  freehold  to  the  mere  purpose  of  amuse- 
ment. The  delightful  moments  he  there  passes  with  his  family  around 
him,  the  wholesome  exercise  he  takes,  the  spirits  he  inhales,  are 
among  the  most  valuable  and  substantial  blessings  of  life.  By  all 
means  then  let  him  lay  out  on  the  ground  as  he  likes,  and  give  full 
scope  to  his  taste,  or  even  caprice;  but  if  caprice  can  be  directed  to 
an  useful  end,  if  he  can  derive  profit  without  abridging  enjoyment, 
his  garden  will  have  additional  merit,  and  present  a  two-fold  source 
of  delight  to  the  eye  of  the  statesman  and  the  philosopher. 
.  I  have  seen  some  few  gardens  possessed  of  this  double  faculty  of 
production ;  whence,  although  the  lime,  horse-chestnut  and  sycamore 
trees,  and  others  of  the  ornamental  kind,  were  by  no  means  ex- 
cluded, any  more  than  the  lawns  and  parterres;  yet  at  the  same  time 
the  fruit-trees,  decked  in  the  bloom  of  vernal  promise,  or  weighed 
down  by  the  maturity  of  autumnal  wealth,  added  a  variety  and  rich- 
ness of  colouring  to  the  other  local  beauties.  The  advantages  of  dis- 
tance and  position  were  attended  to  without  violating  the  conve- 
nience of  division  and  inclosure.  The  beds  and  borders,  planted 
with  vegetables,  were  not  provokingly  straight,  regular,  or  uniform, 

*  If  it  entail  a  further  charge  of  300  dollars  for  annual  repairs  and  mainte- 
nance, the  public  consumption  of  pleasure  or  utility  may  be  set  down  at  10,200 
dollars  per  annum.  This  is  the  only  way  of  taking  the  account,  with  a  view  to 
compare  the  advantage  derived  by  the  payers  of  public  taxes,  with  the  sacrifices 
imposed  on  them  for  the  acquisition  of  such  conveniences.  In  the  case  put 
above,  the  public  will  be  a  gainer,  if  the  outlay  of  10,200  dollars  have  effected 
an  annual  saving  in  the  charge  of  national  production,  or,  what  is  the  same 
thing,  an  annual  increase  of  the  national  product,  of  still  larger  amount.  In  the 
contrary  supposition,  the  national  administration  will  have  led  the  nation  into  a 
losing  concern. 
11* 


120  ON  PRODUCTION.  BOOK  I 

but  harmonised  with  the  undulations  of  .the  surface,  and  of  vegetation 
of  larger  growth ;  and  the  walks  were  so  disposed  as  to  serve  both 
for'pleasure  and  cultivation.  Every  thing  was  arranged  with  a  view 
to  ornament,  even  to  the  vine-trelliced  well  for  filling  the  watering 
pots.  The  whole,  in  short,  was  so  ordered,  as  if  designed  to  impress 
the  conviction,  that  utility  and  beauty  are  by  no  means  incompatible, 
and  that  pleasure  may  grow  up  by  the  side  of  wealth. 

A  whole  country  may,  in  like  manner,  grow,  rich  even  upon  its 
ornamental  possessions.  Were  trees  planted  wherever  they  could 
thrive  without  injury  to  other  products,*  besides  the  accession  of 
beauty  and  salubrity,  and  the  additional  moisture  attracted  by  the 
multiplication  of  timber-trees,  the  value  of  the  timber  alone  would, 
in  a  country  of  much  extent,  amount  to  something  considerable. 

There  is  this  advantage,  in  the  cultivation  of  timber-trees,  that  they 
require  no  human  industry  beyond  the  first  planting,  after  which 
nature  is  the  sole  agent  of  their  production.  But  it  is  not  enough 
merely  to  plant,  we  must  check  the  desire  of  cutting  down,  until  the 
weak  and  slender  stalk,  gradually  imbibing  the  juices  of  the  earth  and 
atmosphere,  shall,  without  the  hand  of  cultivation,  have  acquired 
bulk  and  solidity,  and  spread  its  lofty  foliage  to  the  heavens.f  The 
best  that  man  can  do  for  it  is,  to  forget  it  for  some  years ;  and  even 
where  it  yields  no  annual  product,  it  will  recompense  his  forbearance 
when  arrived  at  maturity,  by  an  ample  supply  of  firing,  and  of  tim- 
ber for  the  carpenter,  the  joiner,  and  the  wheel-wright. 

In  all  ages,  the  love  of  trees  and  their  cultivation  has  been  strongly 
recommended  by  the  best  writers.  The  historian  of  Cyrus  records, 
among  his  chief  titles  to  renown,  the  merit  of  having  planted  all 
Asia  Minor.  In  the  United  States,  upon  the  birth  of  a  daughter,  the 
cultivator  plants  a  little  wood,  to  grow  up  with  her,  and  to  be  her 
portion  on  the  day  of  marriage.  (1)  Sully,  whose  views  of  policy, 
were  extremely  enlightened,  enriched  most  of  the  provinces  of 
France  with  the  plantation  he  directed.  I  have  seen  several,  to 
which  public  gratitude  still  affixes  his  name ;  and  they  remind  me 
of  the  saying  of  Addison,  who  was  wont  to  exclaim,  whenever  he 
saw  a  plantation,  "  A  useful  man  has  passed  this  way." 

"  *  In  many  countries,  an  exaggerated  notion  seems  to  prevail,  of  the  damage 
done  by  timber-trees,  to  other  products  of  the  soil ;  yet  it  should  seem,  that  they 
rather  enhance  than  diminish  the  revenue  of  the  landholder;  for  we  find  those 
countries  most  productive,  that  are  the  best  clothed  with  timber :  witness  Nor 
mandy,  England,  Belgium  and  Lombardy. 

f  The  leaves  of  trees  absorb  the  carbonic-acid  gas  floating  in  the  atmosphere 
we  breathe,  and  which  is  so  injurious  to  respiration.  When  this  gas  is  super- 
abundant, it  brings  on  asphyxia,  and  occasions  death.  On  the  contrary,  vegeta- 
tion increases  the  proportion  of  oxygen,  which  is  the  gas  most  favourable  to  re- 
spiration and  to  health.  Ce.te.ris  paribus,  those  towns  are  the  healthiest,  which 
have  the  most  open  spaces  covered  with  trees.  It  would  be  well  to  plant  all 
our  spacious  quays. 

(1)  The  American  cultivator  might  be  said,  with  much  greater  semblance  of 
truth,  on  the  birth  of  a  daughter,  to  cut  down  "  a  little  wood,"  instead  of  plant 
'ng  one  AMERICAN  EDITOR. 


CHAP.  XIV.  ON  PRODUCTION.  127 

As  yet  we  have  been  taken  up  with  the  consideration  of  the  agents 
essential  to  production ;  without  whose  agency  mankind  would  have 
no  other  subsistence  or  enjoyment,  than  the  scanty  and  limited  sup- 
ply that  nature  affords  spontaneously.  We  first  investigated  the 
mode  in  which  these  agents,  each  in  its  respective  department,  and 
aft  in  concert,  co-operate  in  the  work  of  production,  and  have  after- 
wards examined  in  detail  the  individual  action  of  each,  for  the  fur- 
ther elucidation  of  the  subject.  We  must  now  proceed  to  examine 
the  intrinsic  and  accidental  causes,  which  act  upon  production,  and 
clog  or  facilitate  the  exertion  of  productive  agents. 


CHAPTER  XIV. 

OF  THE  RIGHT  OF  PROPERTY. 

IT  is  the  province  of  speculative  philosophy  to  trace  the  origin  of 
the  right  of  property ;  of  legislation  to  regulate  its  transfer ;  and  of 
political  science  to  devise  the  surest  means  of  protecting  that  right 
Political  economy  recognises  the  right  of  property  solely  as  the  most 
powerful  of  all  encouragements  to  the  multiplication  of  wealth,  and 
is  satisfied  with  its  actual  stability,  without  inquiring  about  its  origin 
or  its  safeguards.  In  fact,  the  legal  inviolability  of  property  is  obvi- 
ously a  mere  mockery,  where  the  sovereign  power  is  unable  to  make 
the  laws  respected,  where  it  either  practises  robbery  itself,*  or  is 
impotent  to  repress  it  in  others;  or  where  possession  is  rendered 
perpetually  insecure,  by  the  intricacy  of  legislative  enactments,  and 
the  subtleties  of  technical  nicety.  Nor  can  property  be  said  to  exist, 
where  it  is  not  matter  of  reality  as  well  as  of  right.  Then,  and  then 
only,  can  the  sources  of  production,  namely,  land,  capital,  and  indus- 
try, attain  their  utmost  degree  of  fecundity.  (1) 

*  The  strength  of  an  individual  is  so  little,  when  opposed  to  that  of  the  go- 
vernment he  lives  under,  that  the  subject  can  have  no  security  against  the  exac- 
tions and  abuses  of  authority,  except  in  those  countries  where  the  guardianship 
of  the  laws  is  entrusted  to  the  all-searching  vigilance  of  a  free  press,  and  their 
violation  checked  by  an  efficient  national  representation. 

(1)  Although',  according  to  our  author,  it  is  the  province  of  speculative  philos- 
ophy to  trace  the  origin  of  property,  the  existence  of  which,  in  all  politico-econo- 
mical inquiries,  is  assumed  as  the  foundation  of  national  wealth,  it  may  not  here  be 
improper  to  introduce  a  few  observations  on  the  Right  of  Property,  illustrating 
its  historical  origin,  and  pointing  out  its  true  character.  Most  writers  on  natu- 
ral law,  among  whom  may  be  named  Grotius,  Puffendorff,  Barbeyrac,  and  Locke,' 
ascribe,  in  general,  the  origin  of  property  to  priority  of  occupancy,  and  have  much 
perplexed  themselves  in  attempting  to  prove  how  this  act  should  give  an  exclu- 
sive right  of  individual  enjoyment  to  what  was  previously  held  in  common 
Elackstone,  although  he  does  not  enter  into  the  dispute  about  the  manner,  sus  'ia» 


128  ON  PRODUCTION.  BOOK  I. 

There  are  some  truths  so  completely  self-evident,  that  demonstra- 
tion is  quite  superfluous.  This  i?  one  of  that  number.  For  who 
will  attempt  to  deny,  that  the  certainty  of  enjoying  the  fruits  of  ono's 

been  remarked,  in  which  occupancy  conveys  a  right  of  property,  expresses  no 
doubt  about  its  having  this  effect,  independent  of  positive  institutions. 

Later  writers  on  jurisprudence  have  adopted  other  theories  on  the  subject  of  pro- 
perty, which  being  altogether  unsatisfactory,  we  will  not  notice,  except  to  remark 
that  the  most  refined  and  ingenious  speculations,  although  equally  inconclusive, 
respecting  the  nature  and  origin  of  property,  are  those  of  Lord  Kames,  in  the 
Essay  on  Property,  in  his  Historical  Law  Tracts. 

DUGALD  STEWART,  however,  is  the  first  inquirer  who  has  taught  us  to  think 
and  reason  with  accuracy  on  this  subject,  and  it  is  to  his  observations  on  the 
Right  of  Property,  contained  in  the  supplement  to  the  chapter,  "Of  Justice,"  in 
his -work  on  the  "Philosophy  of  the  Active  and  Moral  Powers  of  Man,"  that  we 
must  refer  the  reader  who  is  desirous  of  possessing  just  and  unanswerable  argu- 
ments for  the  true  foundations  on  which  property  rests.  We  must  here  content 
ourselves  with  extracting  a  few  passages,  which  will  exhibit  this  illustrious  phi- 
losopher's views  of  the  origin  of  the  acquisition  of  property,  which  he  traces  to 
two  distinct  sources. 

"  It  is  necessary,"  says  Stewart,  "  to  distinguish  carefully  the  complete  right 
of  property,  which  is  founded  on  labour,  from  the  transient  right  of  possession 
which  is  acquired  by  mere  priority  of  occupancy;  thus,  before  the  appropriation 
of  land,  if  any  individual  had  occupied  a  particular  spot,  for  repose  or  shade,  it 
would  have  been  unjust  to  deprive  him  of  possession  of  it.  This,  however,  was 
only  a  transient  right.  The  spot  of  ground  would  again  become  common,  the 
moment  the  occupier  had  left  it;  that  is,  the  right  of  possession  would  remain  no 
longer  than  the  act  of  possession.  Cicero  illustrates  this  happily  by  the  simili- 
tude of  a  theatre.  '  Quemadmodum  theatrum,  cum  commune  sit,  recte  tamen  dici 
potest  ejus  esse  cum  locum  quern  quisque  occuparit.'  The  general  conclusions 
which  I  deduce  are  these : — 1.  That  in  every  state  of  society  labour,  wherever  it 
is  exerted,  is  understood  to  found  a  right  of  property.  2.  That,  according  to 
natural  law,  labour  is  the  only  original  way  of  acquiring  property.  3.  That, 
according  to  natural  law,  mere  occupancy  founds  only  a  right  of  possession ;  and 
that,  whenever  it  founds  a  complete  right  of  property,  it  owes  its  force  to  positive 
institutions." 

After  premising  these  leading  propositions,  he  proceeds  with  what  he  terms  a 
blight  historical  sketch  of  the  different  systems  respecting  the  origin  of  property, 
from  which  we  have  only  room  to  copy  the  following  passage,  which,  however, 
contains  this  eminent  author's  views  of  the  right  of  property,  as  recognised  by 
the  law  of  nature;  and  the  right  of  property,  as  created  by  the  municipal  regU' 
lotions,  and  demonstrating  the  futility  of  the  attempts  hitherto  made  to  resolvfl 
all  the  different  phenomena  into  one  general  principle. 

"  In  such  a  state  of  things  as  that  with  which  we  are  connected,  the  right  of 
property  must  be  understood  to  derive  its  origin  from  two  distinct  sources;  the 
one  is,  that  natural  sentiment  of  the  mind  which  establishes  a  moral  connexion 
between  labour  and  an  exclusive  enjoyment  of  the  fruits  of  it ;  the  other  is  the 
municipal  institutions  of  the  country  where  we  live.  These  institutions  every- 
where  take  rise  partly  from  ideas  of  natural  justice  and  partly  (perhaps  chiefly) 
from  ideas  of  supposed  utility, — two  principles  which,  when  properly  under- 
stood, are,  I  believe,  always  in  harmony  with  each  other,  and  which  it  ought  to 
be  the  great  aim  of  every  legislator  to  reconcile  to  the  utmost  of  his  power.  Among 
those  questions,  however,  which  fall  under  the  cognizance  of  positive  laws,  there 
.are  many  on  which  natural  justice  is  entirely  silent,  and  which,  of  consequence, 
may  be  discussed  on  principles  of  utility  solely.  Such  are  most  of  the  questions 
concerning  the  regulation  of  the  succession  to  a  man's  property  after  IMS  death; 
uf  some  of  which  it  perhaps  may  be  found  that  the  determination  ought  to  vary 
with  the  circumstances  of  the  society,  and  which  have  certainly,  in  fact,  boon 
frequently  determined  by  the  caprice  of  the  legislator,  or  by  some  principle  uiti 


CH*P.  XTV.  ON  PRODUCTION.  120 

land,  capital  and  labour,  is  the  most  powerful  inducement  to  render 
them  productive?  Or  who  is  dull  enough  to  doubt,  that  no  one 
knows  so  well  as  the  proprietor  how  to  make  the  best  use  of  his 
property?  Yet  how  often  in  practice  is  that  inviolability  of  pro- 
perty disregarded,  which,  in  theory,  is  allowed  by  all  to  be  so 
immensely  advantageous  1  How  often  is  it  broken  in  upon  for  the 
most  insignificant  purposes ;  and  its  violation,  that  should  naturally 
excite  indignation,  justified  upon  the  most  flimsy  pretexts]  So  few 
persons  are  there  who  have  a  lively  sense  of  any  but  a  direct  injury, 
or,  with  the  most  lively  feelings,  have  firmness  enough  to  act  up  to 
their  sentiments!  There  is  no  security  of  property,  where  a  despotic 
authority  can  possess  itself  of  the  property  of  the  subject  against  his 
consent.  Neither  is  there  such  security,  where  the  consent  is  merely 
nominal  and  delusive.  In  England,  the  taxes  are  imposed  by  the 
national  representation;  if,  then,  the  minister  be  in  the  possession  of 
an  absolute  majority,  whether  by  means  of  electioneering  influence, 
or  by  the  overwhelming  patronage  foolishly  placed  at  his  disposal, 
taxation  would  no  longer  be  in  reality  imposed  by  the  national  repre- 
sentatives ;  the  body  bearing  that  name  would,  in  effect,  be  the  repre- 
sentatives of  the  minister;  and  the  people  of  England  would  be 
forcibly  subjected  to  the  severest  privations,  to  further  projects  that 
possibly  might  be  every  way  injurious  to  them.* 

It  is  to  be  observed  that  the  right  of  property  is  equally  invaded, 
by  obstructing  the  free  employment  of  the  means  of  production,  as 
by  violently  depriving  the  proprietor  of  the  product  of  his  land, 
capital,  or  industry :  for  the  right  of  property,  as  defined  by  jurists, 
is  the  right  of  use  or  even  abuse.  Thus,  landed  property  is  violated 
by  arbitrarily  prescribing  tillage  or  plantation ;  or  by  interdicting 
particular  modes  of  cultivation ;  the  property  of  the  capitalist  is 
violated,  by  prohibiting  particular  ways  of  employing  it ;  for  instance, 
by  interdicting  large  purchases  of  corn,  directing  all  bullion  to  be 
carried  to  the  mint,  forbidding  the  proprietor  to  build  on  his  own 
soil,  or  prescribing  the  form  and  requisites  of  the  building.  It  is  a 
further  violation  of  the  capitalist's  property  to  prohibit  any  kind  of 
industry,  or  to  load  it  with  duties  amounting  to  prohibition,  after  he 
has  once  embarked  his  capital  in  that  way.  Jt  is  manifest,  that  a 
prohibition  upon  sugar  would  annihilate  most  of  the  capital  of  the 
sugar  refiners,  vested  in  furnaces,  utensils,  &c.  &c.  f 

The  property  a  man  has  in  his  own  industry,  is  violated,  whenever 

mately  resolvable  into  an  accidental  association  of  ideas.  Indeed,  various  case? 
may  be  supposed  in  which  it  is  not  only  useful,  but  necessary,  that  a  rule  should 
be  fixed;  while,  at  the  same  time,  neither  justice  nor  utility  seem  to  be  much 
interested  in  the  particular  decision." — AMERICAN  EDITOR. 

*  Adam  Smith  has  asserted,  that  the  security  afforded  to  property  by  the  law* 
of  England  has  more  than  counteracted  the  repeated  faults  and  blunders  of  its 
government.  It  may  be  doubted,  whether  he  would  now  adhere  to  that  opinion. 

t  It  would  be  vain  to  say  to  him,  why  not  employ  your  works  in  some  other 
way  ?  Probably,  neither  the  spot  nor  the  works  of  a  refinery  could  be  otheiwi?* 
employed  without  enormous  loss. 


130  ON  PRODUCTION.  BOOK  I 

ne  is  forbidden  the  free  exercise  of  his  faculties  ar.  i  f  ilents,  except 
insomuch  as  they  would  interfere  with  the  rights  or'  third  parties. 
A  similar  violation  is  committed  when  a  man's  labour  is  put  in  requi- 
sition for  one  purpose,  though  designed  by  himself  for  another ;  as 
when  an  artisan  or  trader  is  forced  into  the  military  life,  whether 
permanently  or  merely  for  the  occasion. 

I  am  well  aware,  that  the  importance  of  maintaining  social  order, 
whereon  the  security  of  property  depends,  takes  precedence  of  pro- 
perty itself;  for  which  very  reason,  nothing  short  of  the  necessity  of 
defending  that  order  from  manifest  danger  can  authorise  these  or 
similar  violations  of  individual  right.  And  this  it  is  which  impresses 
upon  the  proprietors  the  necessity  of  requiring,  in  the  constitution  of 
the  body  politic,  some  guarantee  or  other,  that  the  public  service 
shall  never  be  made  a  mask  to  the  passions  and  ambition  of  those  in 
power. 

Thus  taxation,  when  not  intended  as  an  engine  of  national  depres- 
sion and  misery,  must  be  proved  indispensable  to  the  existence  of 
social  order;  every  step  it  takes  beyond  these  limits,  is  an  actual 
spoliation ;  for  taxation,  even  where  levied  by  national  consent,  is  a 
violation  of  property ;  since  no  values  can  be  levied,  but  upon  the 
produce  of  the  land,  capital,  and  industry  of  individuals. 

But  there  are  some  extremely  rare  cases,  where  interference 
between  the  owner  and  his  property  is  even  beneficial  to  production 
itself.  For  example,  in  all  countries  that  admit  the  detestable  right 
of  slavery,  a  right  standing  in  hostility  to  all  others,  it  is  found  expe- 
dient to  limit  the  master's  power  over  his  slave,  (a)  Thus  also,  if  a 

*  The  industrious  faculties  are,  of  all  kinds  of  property,  the  least  questiona- 
ble ;  being  derived  directly  either  from  nature,  or  from  personal  assiduity.  The 
property  in  them  is  of  higher  pretensions  than  that  of  the  land,  which  may 
generally  be  traced  up  to  an  act  of  spoliation ;  for  it  is  hardly  possible  to  show  an 
instance,  in  which  its  ownership  has  been  legitimately  transmitted  from  the  first 
occupancy.  It  ranks  higher  than  the  right  of  the  capitalist  also ;  for  even  taking 
it  for  granted,  that  this  latter  has  been  acquired  without  any  spoliation  whatever, 
and  by  the  gradual  accumulations  of  ages,  yet  the  succession  to  it  could  not  have 
been  established  without  the  aid  of  legislation,  which  aid  may  have  been  granted 
on  conditions.  Yet,  sacred  as  the  property  in  the  faculties  of  industry  is,  it  is 
constantly  infringed  upon,  not  only  in  the  flagrant  abuse  of  personal  slavery,  but 
in  many  other  points  of  more  frequent  occurrence. 

A  government  is  guilty  of  an  invasion  upon  it,  when  it  appropriates  to  itself  a 
particular  branch  of  industry,  the  business  of  exchange  and  brokerage  for  exam- 
ple ;  or  when  it  sells  the  exclusive  privilege  of  conducting  it.  It  is  still  a  greater 
violation  to  authorize  a  gendarme,  commissary  of  police,  or  judge,  to  arrest  and 
detain  individuals  at  discretion,  on  the  plea  of  public  safety  or  security  to  the 
constituted  authorities ;  thus  depriving  the  individual  of  the  fair  and  reasonable 
certainty  of  having  his  time  and  faculties  at  his  own  disposal,  and  of  being  able 
to  complete  what  he  may  begin  upon.  What  robber  or  despoiler  could  commit 
n  more  atrocious  act  of  invasion  upon  the  public  security,  certain  as  he  is  of  being 
speedily  put  down,  and  counteracted  by  private  as  well  as  public  opposition  1 

\a)  This  is  merely  an  instance  of  the  necessity  of  counteracting  one  poison 
dv  another.  T. 


CHAP.  XIV.  ON  PRODUCTION.  131 

society  stand  in  urgent  need  of  timber  for  the  shipwright  or  carpen- 
ter, it  must  reconcile  itself  to  some  regulations  respecting  the  felling 
of  private  woods  ;*  or  the  fear  of  losing  the  veins  of  mineral  that 
intersect  the  soil,  may  sometimes  oblige  a  government  to  work  the 
mines  itself.  It  may  be  readily  conceived,  that,  even  if  there  were 
no  restraints  upon  mining,  want  of  skill,  the  impatience  of  avarice, 
or  the  insufficiency  of  capital,  might  induce  a  proprietor  to  exhaust 
the  superficial,  which  are  commonly  the  poorest  loads,  and  occasion 
the  loss  of  superior  depth  and  quality.  (1)  Sometimes  a  vein  of 
mineral  passes  through  the  ground  of  many  proprietors,  but  is  acces- 
sible only  in  one  spot.  In  this  case,  the  obstinacy  of  a  refractory 
proprietor  must  be  disregarded,  and  the  prosecution  of  the  works  be 
compulsory ;  though,  after  all,  I  will  not  undertake  to  affirm,  that  it 
would  not  be  more  advisable  on  the  whole  to  respect  his  rights,  or 
that  the  possession  of  a  few  additional  mines  is  not  too  dearly  pur- 
chased by  this  infringement  upon  the  inviolability  of  property. 

Lastly,  public  safety  sometimes  imperiously  requires  the  sacrifice 
of  private  property ;  but  that  sacrifice  is  a  violation,  notwithstanding 
an'indemnity  given  in  such  cases.  For  the  right  of  property  implies 
the  free  disposition  of  one's  own ;  and  its  sacrifice,  however  fully 
indemnified,  is  a  forced  disposition. 

When  public  authority  is  not  itself  a  spoliator,  it  procures  to  the 
nation  the  greatest  of  all  blessings,  protection  from  spoliation  by 
others.  Without  this  protection  of  each  individual  by  the  united 
force  of  the  whole  community,  it  is  impossible  to  conceive  any  con- 
siderable development  of  the  productive  powers  of  man,  of  land,  and 
of  capital ;  or  even  to  conceive  the  existence  of  capital  at  all ;  for  it 
is  nothing  more  than  accumulated  value,  operating  under  the  safe- 
guard of  authority.  This  is  the  reason  why  no  nation  has  ever 
arrived  at  any  degree  of  opulence,  that  has  not  been  subject  to  a 
regular  government  Civilized  nations  are  indebted  to  political 
organization  for  the  innumerable  and  infinitely  various  productions, 
that  satisfy  their  infinite  wants,  as  well  as  for  the  fine  arts  and  the 
opportunities  of  leisure  that  accumulation  affords,  without  which  the 

*  Probably,  also,  were  it  not  for  maritime  wars,  originating,  sometimes  in 
puerile  vanity,  and  sometimes  in  national  errors  of  self-interest,  commerce  would 
be  the  best  purveyor  of  timber  for  ship-building;  so  that,  in  reality,  the  abuse  of 
the  interference  of  public  authority,  in  respect  to  the  growth  of  private  timber,  is 
only  a  consequence  of  a  previous  abuse  of  a  more  destructive  and  less  excusable 
character. 

(1)  [If  no  one  knows  so  well  as  the  proprietor,  how  to  make  the  best  use  of 
his  property,  as  our  author  has  just  remarked,  what  advantage  can  result  to 
society  from  the  interference,  in  any  case,  of  public  authority,  with  the  rights  of 
individuals  in  the  business  of  production.  Nothing  but  the  absolute  maintenance 
of  the  social  order  should  ever  be  permitted,  for  an  instant,  to  violate  the  sacred 
right  of  private  property.  Quite  as  specious,  though  equally  unsound  reasons 
may  be  assigned  for  imposing  restraints  upon  a  variety  of  other  employments 
besides  mining.]  AMERICAN  EDITOR. 


132  ON  PRODUCTION.  BOOK  L 

faculties  of  the  mind  could  never  be  cultivated,  or  man  by  their 
means  attain  the  full  dignity,  whereof  his  nature  is  susceptible. 

The  poor  man,  that  can  call  nothing  his  own,  is  equally  interested 
with  the  rich  in  upholding  the  inviolability  of  property.  His  personal 
services  would  not  be  available,  without  the  aid  of  accumulations 
previously  made  and  protected.  Every  obstruction  to,  or  dissipation 
of  these  accumulations,  is  a  material  injury  to  his  means  of  gaining 
a  livelihood ;  and  the  ruin  and  spoliation  of  the  higher  is  as  certainly 
followed  by  the  misery  and  degradation  of  the  lower  classes.  A 
confused  notion  of  the  advantages  of  this  right  of  property  has  been 
equally  conducive  with  the  personal  interest  of  the  wealthy,  to  make 
all  civilized  communities  pursue  and  punish  every  invasion  of  pro- 
perty as  a  crime.  The  study  of  political  economy  is  admirably 
calculated  to  justify  and  confirm  this  act  of  legislation;  inasmuch 
as  it  explains  why  the  happy  effects,  resulting  from  the  right  of  pro- 
perty, are  more  striking  in  proportion  as  that  right  is  well  guarded 
by  political  institutions. 


CHAPTER  XV. 

OF  THE  DEMAND  OR  MARKET  FOR  PRODUCTS. 

IT  is  common  to  hear  adventurers  in  the  different  channels  of 
industry  assert,  that  their  difficulty  lies  not  in  the  production,  but  in 
the  disposal  of  commodities;  that  products  would  always  be  abun- 
dant, if  there  were  but  a  ready  demand,  or  market  for  them.  When 
the  demand  for  their  commodities  is  slow,  difficult,  and  productive 
of  little  advantage,  they  pronounce  money  to  be  scarce ;  the  grand 
object  of  their  desire  is,  a  consumption  brisk  enough  to  quicken  sales 
and  keep  up  prices.  But  ask  them  what  peculiar  causes  and  circum- 
stances facilitate  the  demand  for  their  products,  and  you  will  soon 
perceive  that  most  of  them  have  extremely  vague  notions  of  these 
matters ;  that  their  observation  of  facts  is*  imperfect,  and  their  ex- 
planation still  more  so ;  that  they  treat  doubtful  points  as  matter  of 
certainty,  often  pray  for  what  is  directly  opposite  to  their  interests, 
and  importunately  solicit  from  authority  a  protection  of  the  most 
mischievous  tendency. 

To  enable  us  to  form  clear  and  correct  practical  notions  in  regard 
to  markets  for  the  products  of  industry,  we  must  carefully  analyse 
the  best  established  and  most  certain  facts,  and  apply  to  them  the 
inferences  we  have  already  deduced  from  a  similar  way  of  proceed- 
ing; and  thus  perhaps  we  may  arrive  at  new  and  important  truths, 
that  may  serve  to  enlighten  the  views  of  the  agents  of  industry,  and 
to  give  confidence  to  the  measures  of  governments  anxious  to  afford 
them  encouragement. 


CHAP.  XV.  ON  PRODUCTION. 


133 


A  man  who  applies  his  labour  to  the  investing  of  objects  with 
value  by  the  creation  of  utility  of  some  sort,  can  not  expect  such  a 
value  to  be  appreciated  and  paid  for,  unless  where  other  men  have 
the  means  of  purchasing  it.  Now,  of  what  do  these  means  consist? 
Of  other  values  of  other  products,  likewise  the  fruits  of  industry, 
capital,  and  land.  Which  leads  us  to  a  conclusion  that  may  at  first 
sight  appear  paradoxical,  namely,  that  it  is  production  which  opens 
a  demand  for  products. 

Should  a  tradesman  say,  "  I  do  not  want  other  products  for  my 
woollens,  I  want  money,"  there  could  be  little  difficulty  in  convinc- 
ing him"  that  his  customers  could  not  pay  him  in  money,  without 
having  first  procured  it  by  the  sale  of  some  other  commodities  of 
their  own.  "Yonder  farmer,"  he  may  be  told,  "will  buy  your 
woollens,  if  his  crops  be  good,  and  will  buy  more  or  less  according 
to  their  abundance  or  scantiness ;  he  can  buy  none  at  all,  if  his  crops 
fail  altogether.  Neither  can  you  buy  his  wool  nor  his  corn  yourself, 
unless  you  contrive  to  get  woollens  or  some  other  article  to  buy 
withal.  You  say,  you  only  want  money ;  I  say,  you  want  other 
commodities,  and  not  money.  For  what,  in  point  of  fact,  do  you 
want  the  money?  Is  it  not  for  the  purchase  of  raw  materials  or 
stock  for  your  trade,  or  victuals  for  your  support?*  Wherefore,  it 
is  products  that  you  want,  and  not  money.  The  silver  coin  you 
will  have  received  on  the  sale  of  your  own  products,  and  given  in 
the  purchase  of  those  of  other  people,  will  the  next  moment  execute 
the  same  office  between  other  contracting  parties,  and  so  from  one 
to  another  to  infinity;  just  as  a  public  vehicle  successively  transports 
objects  one  after  another.  If  you  can  not  find  a  ready  sale  for  your 
commodity,  will  you  say,  it  is  merely  for  want  of  a  vehicle  to  trans- 
port it  ?  For,  after  all,  money  is  but  the  agent  of  the  transfer  of 
values.  Its  whole  utility  has  consisted  in  conveying  to  your  hands 
the  value  of  the  commodities,  which  your  customer  has  sold,  for  the 
purpose  of  buying  again  from  you ;  and  the  very  next  purchase  you 
make,  it  will  again  convey  to  a  third  person  the  value  of  the  pro- 
ducts you  may  have  sold  to  others.  So  that  you  will  have  bought, 
and  every  body  must  buy,  the  objects  of  want  or  desire,  each  with 
the  value  of  his  respective  products  transformed  into  money  for  the 
moment  only.  Otherwise,  how  could  it  be  possible  that  there 
should  now  be  bought  and  sold  in  France  five  or  six  times  as  many 
commodities,  as  in  the  miserable  reign  of  Charles  VI.?  Is  it  not 
obvious,  that  five  or  six  times  as  many  commodities  must  have 
been  produced,  and  that  they  must  have  served  to  purchase  one  or 
the  other?" 

Thus,  to  say  that  sales  are  dull,  owing  to  the  scarcity  of  money, 
is  to  mistake  the  means  for  the  cause;  an  error  that  proceeds  from 
the  circumstance,  that  almost  all  produce  is  in  the  first  instance 

*  Even  when  money  is  obtained  with  a  view  to  hoard  or  bury  it,  the  ultimata 
object  is  always  to  employ  it  in  a  purchase  of  some  kind.   The  heir  of  the  lucky 
finder  uses  it  in  that  way,  if  the  miser  do  not ;  for  money,  as  money,  has  no  otlie* 
use  than  to  buy  with. 
12 


134  ON  PRODUCTION.  BOOK  L 

exchanged  for  money,  before  it  is  ultimately  converted  into  other 
produce :  and  the  commodity,  which  recurs  so  repeatedly  in  use, 
appears  to  vulgar  apprehensions  the  most  important  of  commodities, 
and  the  end  and  object  of  all  transactions,  whereas  it  is  only  the 
medium.  Sales  cannot  be  said  to  be  dull  because  money  is  scarce, 
but  because  other  products  are  so.  There  is  always  money  enough 
to  conduct  the  circulation  and  mutual  interchange  of  other  values, 
when  those  values  really  exist.  Should  the  increase  of  traffic  require 
more  money  to  facilitate  it,  the  want  is  easily  supplied,  and  is  a 
strong  indication  of  prosperity — a  proof  that  a  great  abundance  of 
values  has  been  created,  which  it  is  wished  to  exchange 'for  other 
values.  In  such  cases,  merchants  know  well  enough  how  to  find 
substitutes  for  the  product  serving  as  the  medium  of  exchange  or 
money :  *  and  money  itself  soon  pours  in,  for  this  reason,  that  all 
produce  naturally  gravitates  to  that  place  where  it  is  most  in  demand. 
It  is  a  'good  sign  when  the  business  is  too  great  for  the  money ;  just 
in  the  same  way  as  it  is  a  good  sign  when  the  goods  are  too  plentiful 
for  the  warehouses. 

When  a  superabundant  article  can  find  no  vent,  the  scarcity  of 
money  has  so  little  to  do  with  the  obstruction  of  its  sale,  that  the 
sellers  would  gladly  receive  its  value  in  goods  for  their  own  con- 
sumption at  the  current  price  of  the  day :  they  would  not  ask  f&r 
money,  or  have  any  occasion  for  that  product,  since  the  only  use 
they  could  make  of  it  would  be  to  convert  it  forthwith  into  articles 
of  their  own  consumption.! 

This  observation  is  applicable  to  all  cases,  where  there  is  a  supply 
of  commodities  or  of  services  in  the  market.  They  will  universally 
find  the  most  extensive  demand  in  those  places,  where  the  most  of 
values  are  produced ;  because  in  no  other  places  are  the  sole  means 
of  purchase  created,  that  is,  values.  Money  performs  but  a  moment- 
ary function  in  this  double  exchange ;  and  \vhen  the  transaction  is 
finally  closed,  it  will  always  be  found,  that  one  kind  of  commodity 
has  been  exchanged  for  another. 

It  is  worth  while  to  remark,  that  a  product  is  no  sooner  created, 
than  it,  from  that  instant,  affords  a  market  for  other  products  to  the 
full  extent  of  its  own  value.  When  the  producer  has  put  the  finishing 
hand  to  his  product,  he  is  most  anxious  to  sell  it  immediately,  lest 
its  value  should  diminish  in  his  hands.  Nor  is  he  less  anxious  to 
dispose  of  the  money  he  may  get  for  it ;  for  the  value  of  money  is 
also  perishable.  But  the  only  way  of  getting  rid  of  money  is  in 
the  purchase  of  some  product  or  other.  Thus,  the  mere  circum- 

*  By  bills  at  sight,  or  after  date,  bank-notes,  running-credits,  write-offs,  &c. 
us  at  London  and  Amsterdam. 

f  I  speak  here  of  their  aggregate  consumption,  whether  unproductive  and  de- 
signed to  satisfy  the  personal  wants  of  themselves  and  their  families,  or  expended 
in  the  sustenance  of  reproductive  industry.  The  woollen  or  cotton  manufacturer 
operates  a  two-fold  consumption  of  wool  and  cotton :  1.  For  his  personal  wear. 
2.  For  the  supply  of  his  manufacture;  hut,  be  the  purpose  of  his  consumption 
what  it  may,  whether  personal  gratification  or  reproduction,  he  must  needs  buy 
Vhat  he  consumes  with  what  he  produces. 


CHAP.  XV.  ON  PRODUCTION.  135 

stance  of  the  creation  of  one  product  immediately  opens  a  vent  for 
other  products. 

For  this  reason,  a  good  harvest  is  favourable,  not  only  to  the 
agriculturist,  but  likewise  to  the  dealers  in  all  commodities  generally. 
The  greater  the  crop,  the  larger  are  the  purchases  of  the  growers. 
A  bad  harvest,  on  the  contrary,  hurts  the  sale  of  commodities  at 
large.  And  so  it  is  also  with  the  products  of  manufacture  and  com- 
merce. The  success  of  one  branch  of  commerce  supplies  more 
ample  means  of  purchase,  and  consequently  opens  a  market  for  the 
products  of  all  the  other  branches ;  on  the  other  hand,  the  stagnation 
of  one  channel  of  manufacture,  or  of  commerce,  is  felt  in  all  the 
rest. 

But  it  may  be  asked,  if  this  be  so,  how  does  it  happen,  that  there 
is  at  times  so  great  a  glut  of  commodities  in  the  market,  and  so  much 
difficulty  in  findings  vent  for  them  ?  Why  cannot  one  of  these  super- 
abundant commodities  be  exchanged  for  another?  I  answer  that  the 
glut  of  a  particular  commodity  arises  from  its  having  outrun  the  total 
demand  for  it  in  one  or  two  ways ;  either  because  it  has  been  pro- 
duced in  excessive  abundance,  or  because  the  production  of  other 
commodities  has  fallen  short. 

It  is  because  the  production  of  some  commodities  has  declined, 
that  other-commodities  are  superabundant.  To  use  a  more  hackneyed 
phrase,  people  have  bought  less,  because  they  have  made  less  profit  :* 
and  they  have  made  less  profit  for  one  or  two  causes;  either  they  have 
found  difficulties  in  the  employment  of  their  productive  means,  or 
these  means  have  themselves  been  deficient 

It  is  observable,  moreover,  that  precisely  at  the  same  time  that  one 
commodity  makes  a  loss,  another  commodity  is  making  excessive 
profit.f  And,  since  such  profits  must  operate  as  a  powerful  stimulus 
to  the  cultivation  of  that  particular  kind  of  products,  there  must 
needs  be  some  violent  means,  or  some  extraordinary  cause,  a  politi- 
cal or  natural  convulsion,  or  the  avarice  or  ignorance  of  authority,  to 
perpetuate  this  scarcity  on  the  one  hand,  and  consequent  glut  on  the 
other.  No  sooner  is  the  cause  of  this  political  disease  removed,  than 
the  means  of  production  feel  a  natural  impulse  towards  the  vacant 
channels,  the  replenishment  of  which  restores  activity  to  all  the 
others.  One  kind  of  production  would  seldom  outstrip  every  other, 
and  its  products  be  disproportionately  cheapened,  were  production 
left  entirely  free.J 

*  Individual  profits  must,  in  every  description  of  production,  from  the  general 
merchant  to  the  common  artisan,  be  derived  from  the  participation  in  the  values 
produced.  The  ratio  of  that  participation  will  form  the  subject  of  Book  II.,  infra. 

f  The  reader  may  easily  apply  these  maxims  to  any  time  or  country  he  is  ac- 
quainted with.  We  have  had  a  striking  instance  in  France  during  the  years 
1811,  1812,  and  1813;  when  the  high  prices  of  colonial  produce  of  wheat,  and 
other  articles,  went  hand-in-hand  with  the  low  price  of  many  others  that  could 
find  no  advantageous  market. 

|  These  considerations  have  hitherto  been  almost  wholly  overlooked,  thotign 
forming  the  basis  of  correct  conclusions  in  matters  of  commerce,  and  of  its  regu- 
lation by  the  national  authority.  The  right  course  where  it  has,  by  good  luck 


130  ON  PRODUCTION.  BOOK  I. 

Should  a  producer  imagine,  that  many  other  classes,  yielding  no 
material  products,  are  his  customers  and  consumers  equally  with  the 
classes  that  raise  themselves  a  product  of  their  own ;  as,  for  example, 
public  functionaries,  physicians,  lawyers,  churchmen,  &c.,  and  thence 
infer,  that  there  is  a  class  of  demand  other  than  that  of  the  actual 
producers,  he  would  but  expose  the  shallowness  and  superficiality  of 
his  ideas.  A  priest  goes  to  a  shop  to  buy  a  gown  or  a  surplice ;  he 
takes  the  value,  that  is  to  make  the  purchase,  in  the  form  of  money. 
Whence  had  he  that  money  1  From  some  tax-gatherer  who  has 
taken  it  from  a  tax-payer.  But  whence  did  this  latter  derive  it  1 
From  the  value  he  has  himself  produced.  This  value,  first  produced 
by  the  tax-payer,  and  afterwards  turned  into  money,  and  given  to 
the  priest  for  his  salary,  has  enabled  him  to  make  the  purchase. 
The  priest  stands  in  the  place  of  the  producer,  who  might  himself 

been  pursued,  appears  to  have  been  selected  by  accident,  or,  at  most,  by  a  con- 
fused idea  of  its  propriety,  without  either  self-conviction,  or  the  ability  to  con- 
vince other  people. 

Sismondi,  who  seems  not  to  have  very  well  understood  the  principles  laid  down 
in  this  and  the  three  first  chapters  of  Book  II.  of  this  work,  instances  the  im- 
mense quantity  of  manufactured  products  with  which  England  has  of  late  inun- 
dated the  markets  of  other  nations,  as  a  proof,  that  it  is  impossible  for  industry 
to  be  too  productive.  (Nouv.  Prin.  liv.  iv.  c.  4.)  But  the  glut  thus  occasioned 
proves  nothing  more  than  the  feebleness  of  production  in  those  countries  that 
have  been  thus  glutted  with  English  manufactures.  Did  Brazil  produce  where- 
withal to  purchase  the  English  goods  exported  thither,  those  goods  would  not 
glut  her  market.  Were  England  to  admit  the  import  of  the  products  of  the 
United  States,  she  would  find  a  better  market  for  her  own  in  those  States.  The 
English  government,  by  the  exorbitance  of  its  taxation  upon  import  and  consump- 
tion, virtually  interdicts  to  its  subjects  many  kinds  of  importation,  thus  obliging 
the  merchant  to  offer  to  foreign  countries  a  higher  price  for  those  articles,  whose 
import  is  practicable,  as  sugar,  coffee,  gold,  silver,  &c.  for  the  price  of  the  precious 
metals  to  them  is  enhanced  by  the  low  price  of  their  commodities,  which  accounts 
for  the  ruinous  returns  of  their  commerce. 

I  would  not  be  understood  to  maintain  in  this  chapter,  that  one  product  can  not 
be  raised  in  too  great  abundance,  in  relation  to  all  others ;  but  merely  that  nothing 
is  more  favourable  to  the  demand  of  one  product,  than  the  supply  of  another;  that 
the  import  of  English  manufactures  into  Brazil  would  cease  to  be  excessive  and 
be  rapidly  absorbed,  did  Brazil  produce  on  her  side  returns  sufficiently  ample ; 
to  which  end  it  would  be  necessary  that  the  legislative  bodies  of  either  country 
should  consent,  the  one  to  free  production,  the  other  to  free  importation.  In 
Brazil  every  thing  is  grasped  by  monopoly,  and  property  is  not  exempt  from  the 
invasion  of  the  government.  In  England,  the  heavy  duties  are  a  serious  obstruc- 
tion to  the  foreign  commerce  of  the  nation,  inasmuch  as  they  circumscribe  the 
choice  of  returns.  I  happen  myself  to  know  of  a  most  valuable  and  scientific 
collection  of  natural  history,  which  could  not  be  imported  from  Brazil  into  Eng- 
land by  reason  of  the  exorbitant  duties,  (a) 

(a)  The  views  of  Sismondi,  in  this  particular,  have  been  since  adopted  by  our 
own  Malthus,  and  those  of  our  author  by  Ricardo.  This  difference  of  opinion 
lias  given  rise  to  an  interesting  discussion  between  our  author  and  Malthus,  to 
whom  he  has  recently  addressed  a  correspondence  on  this  and  other  parts  of  the 
science.  Were  any  thing  wanting  to  confirm  the  arguments  of  this  chapter,  it 
would  be  supplied  by  a  reference  to  his  Lettre  1,  a  M.  Malthus.  Sismondi  has 
vainly  attempted  to  answer  Kicardo,  but  has  made  no  mention  of  his  original 
antagonist,  Vide  Annales  de  Legislation,  No.  1.  art.  3.  Geneve,  1820.  T. 


CHAP.  XV.  ON  PRODUCTION.  137 

have  laid  the  value  of  his  product  on  his  own  account,  in  the  pur- 
chase, perhaps,  not  of  a  gown  or  surplice,  but  of  some  other  more 
serviceable  product.  The  consumption  of  the  particular  product,  the 
gown  or  surplice,  has  but  supplanted  that  of  some  other  product.  It 
is  quite  impossible  that  the  purchase  of  one  product  can  be  affected, 
otherwise  than  by  the  value  of  another.* 

From  this  important  truth  may  be  deduced  the  following  important 
conclusions : — 

1.  That,  in  every  community  the  more  numerous  are  the  pro- 
ducers, and  the  more  various  their  productions,  the  more  prompt, 
numerous,  and  extensive  are  the  markets  for  those  productions ;  and, 
by  a  natural  consequence,  the  more  profitable  are  they  to  the  pro- 
ducers ;  for  price  rises  with  the  demand.  But  this  advantage  is  to  be 
derived  from  real  production  alone,  and  not  from  a  forced  circulation 
of  products ;  for  a  value  once  created  is  not  augmented  in  its  passage 
from  one  hand  to  another,  nor  by  being  seized  and  expended  by  the 
government,  instead  of  by  an  individual.    The  man,  that  lives  upon 
the  pi  eductions  of  other  people,  originates  no  demand  for  those  pro- 
ductions ;  he  merely  puts  himself  in  the  place  of  the  producer,  to 
the  great  injury  of  production,  as  we  shall  presently  see. 

2.  That  each  individual  is  interested  in  the  general  prosperity  of 
all,  and  that  the  success  of  one  branch  of  industry  promotes  that  of 
all  the  others.     In  fact,  whatever  profession  or  line  of  business  a 
man  may  devote  himself  to,  he  is  the  better  paid  and  the  more 
readily  finds  employment,  in  proportion  as  he  sees  others  thriving 
equally  around  him.     A  man  of  talent,  that  scarcely  vegetates  in  a 
retrograde  state  of  society,  would  find  a  thousand  ways  of  turning 
his  faculties  to  account  in  a  thriving  community  that  could  afford  to 
employ  and  reward  his  ability.     A  merchant  established  in  a  rich 
and  populous  town,  sells  to  a  much  larger  amount  than  one  who  sets 
up  in  a  poor  district,  with  a  population  sunk  in  indolence  and  apathy. 
What  could  an  active  manufacturer,  or  an  intelligent  merchant,  do 
in  a  small  deserted  and  semi-barbarous  town  in  a  remote  corner  of 
Poland  or  Westphalia?  Though  in  no  fear  of  a  competitor,  he  could 
sell  but  little,  because  little  was  produced ;  whilst  at  Paris,  Amster- 
dam, or  London,  in  spite  of  the  competition  of  a  hundred  dealers  in 
his  own  line,  he  might  do  business  on  the  largest  scale.   The  reason 
is  obvious:  he  is  surrounded  with  people  who  produce  largely  in  an 
infinity  of  ways,  and  who  make  purchases,  each  with  his  respective 
products,  that  is  to  say,  with  the  money  arising  from  the  sale  of 
what  he  may  have  produced. 

This  is  the  true  source  of  the  gains  made  by  the  towns'  people  out 
of  the  country  people,  and  again  by  the  latter  out  of  the  former;  both 

*  The  capitalist,  in  spending  the  interest  of  his  capital,  spends  his  portion  of  the 
products  raised  by  the  employment  of  that  capital.  The  general  rules  that,  regu- 
late the  ratio  he  receives  will  be  investigated  in  Book  II.,  infra.  Should  he  ever 
spend  the  principal,  still  he  consumes  products  only ;  for  capital  consists  of  pro- 
ducts, devoted  indeed  to  reproductive,  but  susceptible  of  unproductive  consump- 
tion ;  to  which  it  is  in  fact  consigned  whenever  it  is  wasted  or  dilapidated, 
12*  S 


138  ON  PRODUCTION.  BOOK  L 

of  them  have  wherewith  to  buy  more  largely,  the  more  amply  they 
themselves  produce.  A  city,  standing  in  the  centre  of  a  rich  sur- 
rounding country,  feels  no  want  of  rich  and  numerous  customers ; 
and,  on  the  other  hand,  the  vicinity  of  an  opulent  city  gives  addi- 
tional value  to  the  produce  of  the  country.  The  division  of  nations 
into  agricultural,  manufacturing,  and  commercial,  is  idle  enough. 
For  the  success  of  a  people  in  agriculture  is  a  stimulus  to  its  manu- 
facturing and  commercial  prosperity ;  and  the  flourishing  condition 
of  its  manufacture  and  commerce  reflects  a  benefit  upon  its  agri- 
culture also.* 

The  position  of  a  nation,  in  respect  of  its  neighbours,  is  analogous 
to  the  relation  of  one  of  its  provinces  to  the  others,  or  of  the  country 
to  the  town ;  it  has  an  interest  in  their  prosperity,  being  sure  to  profit 
by  their  opulence.  The  government  of  the  United  States,  therefore, 
acted  most  wisely,  in  their  attempt,  about  the  year  1802,  to  civilize 
their  savage  neighbours,  the  Creek  Indians.  The  design  was  to 
introduce  habits  of  industry  amongst  them,  and  make  them  producers 
capable  of  carrying  on  a  barter  trade  with  the  States  of  the  Union ; 
for  there  is  nothing  to  be  got  by  dealing  with  a  people  that  have 
nothing  to  pay.  It  is  useful  and  honourable  to  mankind,  that  one 
nation  among  so  many  should  conduct  itself  uniformly  upon  liberal 
principles.  The  brilliant  results  of  this  enlightened  policy  will  cfe- 
monstrate,  that  the  systems  and  theories  really  destructive  and  falla- 
cious, are  the  exclusive  and  jealous  maxims  acted  upon  by  the  old 
European  governments,  and  by  them  most  impudently  styled  prac- 
tical truths,  for  no  other  reason,  as  it  would  seem,  than  because  they 
have  the  misfortune  to  put  them  in  practice.  The  United  States 
will  have  the  honour  of  proving  experimentally,  that  true  policy  goes 
hand-in-hand  with  moderation  and  humanity.f 

*  A  productive  establishment  on  a  large  scale  is  sure  to  animate  the  industry 
of  the  whole  neighbourhood.  "  In  Mexico,"  says  Humboldt,  "  the  best  culti- 
vated tract,  and  that  which  brings  to  the  recollection  of  the  traveller  the  most 
beautiful  part  of  French  scenery,  is  the  level  country  extending  from  Salamanca 
as  far  as  Silao,  Guanaxuato,  and  Villa  de  Leon,  and  encircling  the  richest  mines 
of  the  known  world.  Wherever  the  veins  of  precious  metal  have  been  discovered 
and  worked,  even  in  the  most  desert  part  of  the  Cordilleras,  and  in  the  most 
barren  and  insulated  spots,  the  working  of  the  mines,  instead  of  interrupting  the 
business  of  superficial  cultivation,  has  given  it  more  than  usual  activity.  The 
opening  of  a  considerable  vein  is  sure  to  be  followed  by  the  immediate  erection 
of  a  town ;  farming  concerns  are  established  in  the  vicinity;  and  the  spot  so  lately 
insulated  in  the  midst  of  wild  and  desert  mountains,  is  soon  brought  into  contact 
with  the  tracts  before  in  tillage."  Essai  pol.  sur.  la  Nouv.  Espagne. 

f  It  is  only  by  the  recent  advances  of  political  economy,  that  these  most 
important  truths  have  been  made  manifest,  not  to  vulgar  apprehension  alone,  but 
even  to  the  most  distinguished  and  enlightened  observers.  We  read  in  Voltaire 
that  "such  is  the  lot  of  humanity,  that  the  patriotic  desire  for  one's  country's 

grandeur,  is  but  a  wish  for  the  humiliation  of  one's  neighbours; that  it  is 

clearly  impossible  for  one  country  to  gain,  except  by  the  loss  of  another."  (Di-.t. 
Phil.  Art.  Patrie.}  By  a  continuation  of  the  same  false  reasoning,  he  goes  on  to 
declare,  that  a  thorough  citizen  of  the  world  cannot  wish  his  country  to  bo 
greater  or  less,  richer  or  poorer.  It  is  true,  that  he  would  not  desire  her  to  extend 
ihe  limits  of  her  dominion,  because,  in  so  doing,  she  might  endanger  her  o\vn 


CHAP.  XV.  ON  PRODUCTION. 


139 


3.  From  this  fruitful  principle,  we  may  draw  this  further  conclu- 
sion, that  it  is  no  injury  to  the  internal  or  national  industry  and  pro- 
duction to  buy  and  import  commodities  from  abroad ;  for  nothin<r 
can  be  bought  from  strangers,  except  with  native  products,  whicn" 
find  a  vent  in  this  external  traffic.     Should  it  be  objected,  that  this 
foreign  produce  may  have  been  bought  with  specie,  I  answer,  specie 
6  not  always  a  native  product,  but  must  have  been  bought  itself 
with  the  products  of  native  industry ;  so  that,  whether  the  foreign 
articles  be  paid  for  in  specie  or  in  home  products,  the  vent  for 
national  industry  is  the  same  in  both  cases.* 

4.  The  same  principle  leads  to  the  conclusion,  that  the  encourage- 
ment of  mere  consumption  is  no  benefit  to  commerce  ;  for  the  diffi- 
culty lies  in  supplying  the  means,  not  in  stimulating  the  desire  of 
consumption;  and  we  have  seen  that  production  alone,  furnishes 
those  means.     Thus,  it  is  the  aim  of  good  government  to  stimulate 
production,  of  bad  government  to  encourage  consumption. 

For  the  same  reason  that  the  creation  of  a  new  product  is  the 
opening  of  a  new  market  for  other  products,  the  consumption  or 
destruction  of  a  product  is  the  stoppage  of  a  vent  for  them.  This  is 
no  evil  where  the  end  of  the  product  has  been  answered  by  its 
destruction,  which  end  is  the  satisfying  of  some  human  want,  or  the 
creation  of  some  new  product  designed  for  such  a  satisfaction. 
Indeed,  if  the  nation  be  in  a  thriving  condition,  the  gross  national 
re-production  exceeds  the  gross  consumption.  The  consumed  pro- 
ducts have  fulfilled  their  office,  as  it  is  natural  and  fitting  they  should ; 
the  consumption,  however,  has  opened  no  new  market,  but  just  the 
reverse.f 

Having  once  arrived  at  the  clear  conviction,  that  the  general  de- 
mand for  products  is  brisk  in  proportion  to  the  activity  of  production, 
we  need  not  trouble  ourselves  much  to  inquire  towards  what  chan- 
nel of  industry  production  may  be  most  advantageously  directed. 
The  products  created  give  rise  to  various  degrees  of  demand,  accord  • 
ing  to  the  wants,  the  manners,  the  comparative  capital,  industry,  ana 

well-being ;  but  he  will  desire  her  to  progress  in  wealth,  for  her  progressive 
prosperity  promotes  that  of  all  other  nations. 

*  This  effect  has  been  sensibly  experienced  in  Brazil  of  late  years.  The  large 
imports  of  European  commodities,  which  the  freedom  of  navigation  directed  to 
the  markets  of  Brazil,  has  been  so  favourable  to  its  native  productions  and 
commerce,  that  Brazilian  products  never  found  so  good  a  sale.  So  there  is  an 
instance  of  a  national  benefit  arising  from  importation.  By  the  way,  it  might 
have  perhaps  been  better  for  Brazil  if  the  prices  of  her  products  and  the  profits 
of  her  producers  had  risen  more  slowly  and  gradually;  for  exorbitant  prices 
never  lead  to  the  establishment  of  a  permanent  commercial  intercourse ;  it  is 
better  to  gain  by  the  multiplication  of  one's  own  products  than  by  their  increased 
price. 

f  If  the  barren  consumption  of  a  product  be  of  itself  adverse  to  re-production, 
and  a  diminution  pro  tanto  of  the  existing  demand  or  vent  for  produce,  how  shall 
we  designate  that  degree  of  insanity,  which  would  induce  a  government  delibe- 
rately to  burn  and  destroy  the  imports  of  foreign  products,  and  thus  to  annihilate 
the  sole  advantage  accruing  from  unproductive  consumption,  that  is  to  SPV  uie 
gratification  of  the  want's  of  the  consumer'1 


HO  ON  PRODUCTION.  BOOK  I. 

natural  resources  of  each  country ;  the  article  most  in  request, 
owing  to  the  competition  of  buyers,  yields  the  best  interest  of  money 
to  the  capitalist,  the  largest  profits  to  the  adventurer,  and  the  best 
wages  to  the  labourer ;  and  the  agency  of  their  respective  services 
is  naturally  attracted  by  these  advantages  towards  those  particular 
channels. 

In  a  community,  city,  province,  or  nation,  that  produces  abun- 
dantly, and  adds  every  moment  to  the  sum  of  its  products,  almost  all 
the  branches  of  commerce,  manufacture,  and  generally  of  industry, 
yield  handsome  profits,  because  the  demand  is  great,  and  because 
there  is  always  a  large  quantity  of  products  in  the  market,  ready  to 
bid  for  new  productive  services.  And,  vice  versa,  wherever,  by 
reason  of  the  blunders  of  the  nation  or  its  government,  production  is 
stationary,  or  does  not  keep  pace  with  consumption,  the  demand 
gradually  declines,  the  value  of  the  product  is  less  than  the  charges 
of  its  production ;  no  productive  exertion  is  properly  rewarded  ;  pro- 
fits and  wages  decrease ;  the  employment  of  capital  becomes  less 
advantageous  and  more  hazardous;  it  is  consumed  piecemeal,  not 
through  extravagance,  but  through  necessity,  and  because  the  sources 
of  profit  are  dried  up.*  The  labouring  classes  experience  a  want  of 
work ;  families  before  in  tolerable  circumstances,  are  more  cramped 
*  and  confined ;  and  those  before  in  difficulties  are  left  altogether  des- 
titute. Depopulation,  misery,  and  returning  barbarism,  occupy  the 
place  of  abundance  and  happiness. 

Such  are  the  concomitants  of  declining  production,  which  are 
only  to  be  remedied  by  frugality,  intelligence,  activity,  and  freedom. 


CHAPTER  XVI. 

Of  THE  BENEFITS   RESULTING  FROM   THE  UUICR    CIRCULATION    OF 
MONEY   AND  COMMODITIES. 

Ii  is  common  to  hear  people  descant  upon  the  benefits  of  an  active 
circulation ;  that  is  to  say,  of  numerous  and  rapid  sales.  It  is  mate- 
rial to  appreciate  them  correctly. 

The  values  engaged  in  actual  production  cannot  be  realized  and 
employed  in  production  again,  until  arrived  at  the  last  staqe  of  com- 
pletion, and  sold  to  the  consumer.  The  sooner  a  product  is  finished 
and  sold,  the  sooner  also  can  the  portion  of  capital  vested  in  it  be 
applied  to  the  business  of  fresh  production.  The  capital  being 
engaged  a  shorter  time,  there  is  less  interest  payable  to  the  capi- 

*  Consumption  of  this  kind  gives  no  encouragement  to  future  production,  V*U 
devouis  products  already  in  existence.  No  additional  demand  can  be  crea^M 
until  there  be  new  products  raised ;  there  is  only  an  exchange  of  one  product  tur 
another.  Neither  can  one  branch  of  industry  suffer  without  affecting  the  rest 


CHAP.  XVI.  ON  PRODUCTION.  HI 

talist;  there  is  a  saving  in  the  charges  of  production;  it  is,  therefore, 
an  advantage,  that  the  successive  operations  performed  in  the  course 
of  production  should  be  rapidly  executed. 

By  way  of  illustrating  the  effects  of  this  activity  of  circulation,  let 
us  trace  them  in  the  instance  of  a  piece  of  printed  calico.* 

A  Lisbon  trader  imports  the  cotton  from  Brazil.  It  is  his  interest 
that  his  factors  in  America  be  expeditious  in  making  purchases  and 
remitting  cargoes,  and  likewise,  that  he  meet  no  delay  in  selling  his 
cotton  to  a  French  merchant ;  because  he  thereby  gets  his  returns 
the  sooner,  and  can  sooner  recommence  a  new  and  equally  lucrative 
operation.  So  far,  it  is  Portugal  that  benefits  by  the  increased 
activity  of  circulation ;  the  subsequent  advantage  is  6n  the  side  of 
France.  If  the  French  merchant  keep  the  Brazil  cotton  but  a  short 
time  in  his  warehouse,  before  he  sells  it  to  the  cotton-spinner,  if  the 
spinner  after  spinning  sell  it  immediately  to  the  weaver,  if  the 
weaver  dispose  of  it  forthwkh  to  the  calico  printer,  and  he  in  his  turn 
sell  it  without  much  delay  to  the  retail  dealer,  from  whom  it  quickly 
passes  to  the  consumer,  this  rapid  circulation  will  have  occupied  for 
a  shorter  period  the  capital  embarked  by  these  respective  producers ; 
less  interest  of  capital  will  have  been  incurred ;  consequently  the 
prime  cost  of  the  article  will  be  lower,  and  the  capital  will  have  been 
the  sooner  disengaged  and  applicable  to  fresh  operations. 

All  these  different  purchases  and  sales,  with  many  others  that,  for 
brevity's  sake,  I  have  not  noticed,  were  indispensable  before  the 
Brazil  cotton  could  be  worn  in  the  shape  of  printed  calicoes.  They 
are  so  many  productive  fashions  given  to  this  product ;  and  the  more 
rapidly  thev  may  have  been  given,  the  more  benefit  will  have  been 
derive'd  from  the  production.  But,  if  the  same  commodity  be  merely 
sold  several  times  over  in  a  year  in  the  same  place,  without  under- 
going any  fresh  modification,  this  circulation  would  be  a  loss  instead 
of  a  gain,  and  would  increase  instead  of  reducing  the  prime  cost  to 
the  consumer.  A  capital  must  be  employed  in  buying  and  re-selling, 
and  interest  paid  for  its  use,  to  say  nothing  of  the  probable  wear 
and  tear  of  the  commodity. 

Thus,  jobbing  in  merchandise  necessarily  causes  a  loss,  either  to 
the  jobber,  if  the  price  be  not  raised  by  the  transaction,  or  to  the 
consumer,  if  it  be  raised.f 

The  activity  of  circulation  is  at  the  utmost  pitch  to  which  it  can 
be  carried  with  advantage,  when  the  product  passes  into  the  hands 

*  The  term  circulation,  as  well  as  many  others  employed  in  the  science  of 
political  economy,  is  daily  made  use  of  at  random,  even  by  persons  that  pride 
themselves  upon  their  precision.  "  The  more  equally  circulation  is  diffused," 
says  La  Harpe,  in  one  of  his  works,  "  the  less  indigence  is  to  be  found  in  the 
community."  With  great  deference  to  the  learned  academician,  what  possible 
meaning  can  the  word  circulation  have  in  this  passage  ] 

t  The  trade  of  speculation,  as  we  have  before  observed,  (supra,  Chap.  IX.)  ia 
sometimes  of  use  in  withdrawing  an  article  from  circulation,  when  its  price  is 
so  low  as  to  discourage  the  producer,  and  restoring  it  to  circulation,  when  that 
price  is  unnaturally  raised  upon  the  consumer. 


142  ON  PRODUCTION.  BOOK  L 

of  a  new  productive  agent  the  instant  it  is  fit  to  receive  a  new  modi- 
fication, and  is  ultimately  handed  over  to  the  consumer,  the  instant 
it  has  received  the  last  finish.  All  kind  of  activity  and  bustle  not 
tending  to  this  end,  far  from  giving  additional  activity  to  circulation, 
is  an  impediment  to  the  course  of  production — an  obstacle  to  circu- 
lation by  all  means  to  be  avoided. 

With  respect  to  the  rapidity  of  production  arising  from  the  more 
skilful  direction  of  industry,  it  is  an  increase  of  rapidity  not  in  cir- 
culation, but  in  productive  energy.  The  advantage  is  analogous ;  it 
abridges  the  amount  of  capital  employed 

I  have  made  no  distinction  between  the  circulation  of  goods  and 
of  money,  because  there  really  is  none.  While  a  sum  of  money  lies 
idle  in  a  merchant's  coffers,  it  is  an  inactive  portion  of  his  capital, 
precisely  of  the  same  nature  as  that  part  of  his  capital  which  is 
lying  in  his  warehouse  in  the  shape  of  goods  ready  for  sale. 

The  best  stimulus  of  useful  circulation  is,  the  natural  wish  of  all 
classes,  especially  the  producers  themselves,  to  incur  the  least  possi- 
ble amount  of  interest  upon  the  capital  embarked  in  their  respective 
undertakings.  Circulation  is  much  more  apt  to  be  interrupted  by 
the  obstacles  thrown  in  its  way,  than  by  the  want  of  proper  encour- 
agement. Its  greatest  obstructions  are,  wars,  embargoes,  oppressive 
duties,  the  dangers  and  difficulties  of  transportation.  It  flags  in 
times  of  alarm  and  uncertainty,  when  social  order  is  threatened,  and 
all  undertakings  are  hazardous.  It  flags,  too,  under  the  general  dread 
of  arbitrary  exactions,  when  every  one  tries  to  conceal  the  extent  of 
his  ability.  Finally,  it  flags  in  times  of  jobbing  and  speculation, 
when  the  sudden  fluctuations  caused  by  gambling  in  produce,  make 
people  look  for  a  profit  from  every  variation  of  mere  relative  price : 
goods  are  then  held  back  in  expectation  of  a  rise,  and  money  in  the 
prospect  of  a  fall ;  and,  in  the  interim,  both  these  capitals  remain 
inactive  and  useless  to  production.  Under  such  circumstances, 
there  is  no  circulation,  but  of  such  products  as  cannot  be  kept  with- 
out danger  of  deterioration ;  as  fruits,  vegetables,  grain,  and  all  arti- 
cles that  spoil  in  the  keeping.  With  regard  to  them,  it  is  thought 
wiser  to  incur  the  loss  of  present  sale,  whatever  it  be,  than  to  risk 
considerable  or  total  loss.  If  the  national  money  be  deteriorated,  it 
becomes  an  object  to  get  rid  of  it  in  any  way,  and  exchange  it  for 
commodities.  This  was  one  of  the  causes  of  the  prodigious  circu- 
lation that  took  place  during  the  progressive  depreciation  of  the 
French  assignats.  Everybody  was  anxious  to  find  some  employ- 
ment for  a  paper  currency,  whose  value  was  hourly  depreciating ;  it 
was  only  taken  to  be  re-invested  immediately,  and  one  might  have 
supposed  it  burnt  the  fingers  it  passed  through.  On  that  occasion, 
men  plunged  into  business,  of  which  they  were  utterly  ignorant ; 
manufactures  were  established,  houses  repaired  and  furnished,  no 
expense  was  spared  even  in  pleasure;  until  at  length  all  the  value 
each  individual  possessed  in  assignats  was  finally  consumed,  invest 
en  or  lost  altogether. 


CHAP-  XVII.  ON  PRODUCTION.  143 


CHAPTER  XYII. 

OF  THE  EFFECT  OF  GOVERNMENT  REGULATIONS  INTENDED  TO  INFLUENCE 

PRODUCTION. 

STRICTLY  speaking,  there  is  no  act  of  government  but  what  has 
some  influence  upon  production.  I  shall  confine  myself  in  this 
chapter  to  such  as  are  avowedly  aimed  at  the  exertion  of  such  in- 
fluence ;  reserving  the  effects  of  the  monetary  system,  of  loans,  and 
of  taxes,  to  be  treated  of  in  distinct  chapters. 

The  objecU  of  governments,  in  their  attempts  to  influence  produc- 
tion, is,  either  to  prescribe  the  raising  of  particular  kinds  of  produce 
which  they  judge  more  advantageous  than  others,  or  to  prescribe 
methods  of  production,  which  they  imagine  preferable  to  other 
methods.  The  effects  of  this  two-fold  attempt  upon  national  wealth 
will  be  investigated  in  the  two  first  sections  of  this  chapter ;  in  the 
remaining  two,  I  shall  apply  the  same  principles  to  the  particular 
cases  of  privileged  companies,  and  of  the  corn-trade,  both  on  account 
of  their  vast  importance,  and  for  the  purpose  of  further  explaining 
and  illustrating  the  principles.  We  shall  see,  by  the  way,  what 
reasons  and  circumstances  will  require  or  justify  a  deviation  from 
general  principles.  The  grand  mischiefs  of  authoritative  interference 
proceed  not  from  occasional  exceptions  to  established  maxims,  but 
from  false  ideas  of  the  nature  of  things,  and  the  false  maxims  built 
upon  them.  It  is  then  that  mischief  is  done  by  wholesale,  and  evil 
pursued  upon  system ;  for  it  is  well  to  beware,  that  no  set  of  men 
are  more  bigoted  to  system,  than  those  who. boast  that  they  go  upon 
none.* 

SECTION  I. 
Effect  of  Regulations  prescribing  the  Nature  of  Products. 

The  natural  wants  of  society,  and  its  circumstances  for  the  time 
being,  occasion  a  more  or  less  lively  demand  for  particular  kinds  of 
products.  Consequently,  in  these  branches  of  production,  produc- 
tive services  are  somewhat  better  paid  than  in  the  rest;  that  is  to  say, 
the  profits  upon  land,  capital  and  labour,  devoted  to  those  branches 
of  production,  are  somewhat  larger.  This  additional  profit  naturally 

*  The  greatest  sticklers  for  adhering  to  practical  notions,  set  out  with  the 
assertion  of  general  principles :  they  begin,  for  instance,  with  saying,  that  no 
one  can  disputeighe  position,  that  one  individual  can  gain  only  what  another 
loses,  and  one  nation  profit  only  by  the  sacrifices  of  another.     What  is  this  but 
system  1  and  one  so  unsound,  that  its  abettors,  instead  of  possessing  more  prac 
tical  knowledge  than  other  people,  show  their  utter  ignorance  of  many  facts,  the 
acquaintance  with  which  is  indispensable  to  the  formation  of  a  correct  judgment 
No  man,  who  understands  the  real  nature  of  production,  and  sees  how  new  we^|tli 
may  be,  and  is  daily  created,  would  attempt  to  advance  so  gross  an  absurdity 


144  ON  PRODUCTION.  BOOK  L 

attracts  producers,  and  thus  the  nature  of  the  products  is  always 
regulated  by  the  wants  of  society.  We  have  seen  in  a  preceding 
chapter  (XV.,)  that  these  wants  are  more  ample  in  proportion  to  the 
sum  of  gross  production,  and  that  society  in  the  aggregate  is  a  larger 
purchaser,  in  proportion  to  its  means  of  purchasing. 

When  authority  throws  itself  in  the  way  of  this  natural  course  of 
things,  and  says,  the  product  you  are  about  to  create,  that  which 
yields  the  greatest  profit,  and  is  consequently  the  most  in  request,  is 
by  no  means  the  most  suitable  to  your  circumstances,  you  must 
undertake  some  other,  it  evidently  directs  a  portion  of  the  produc- 
tive energies  of  the  nation  towards  an  object  of  less  desire,  at  the 
expense  of  another  of  more  urgent  desire. 

In  France,  about  the  year  1794,  there  were  some  persons  perse- 
cuted, and  even  brought  to  the  scaffold,  for  having  converted  corn- 
land  into  pasturage.  Yet  the  moment  these  unhappy  people  found 
it  more  profitable  to  feed  cattle  than  to  grow  corn,  one  might  have 
been  sure  that  society  stood  more  in  need  of  cattle  than  of  corn, 
and  that  greater  value  could  be  produced  in  one  way  than  in  the 
other. 

But,  said  the  public  authorities,  the  value  produced  is  of  less 
importance  than  the  nature  of  the  product,  and  we  would  rather 
have  you  raise  10  dollars  worth  of  grain  than  20  dollars  worth  of 
butcher's  meat.  In  this  they  betrayed  their  ignorance  of  this  sim- 
ple truth,  that  the  greatest  product  is  always  the  best ;  and  that  an 
estate,  which  should  produce  in  butcher's  meat  wherewith  to  pur- 
chase twice  as  much  wheat  as  could  have  been  raised  upon  it,  pro- 
duces, in  reality,  twice  as  much  wheat  as  if  it  had  been  sowed  with 
grain ;  since  wheat  to  twice  the  amount  is  to  be  got  for  its  product. 
This  way  of  getting  wheat,  they  will  tell  you,  does  not  increase  its 
total  quantity.  True,  unless  it  be  introduced  from  abroad;  but 
nevertheless,  this  article  must  at  the  time  be  relatively  more  plenti- 
ful than  butcher's  meat,  because  the  product  of  two  acres  of  wheat 
is  given  for  that  of  one  acre  of  pasture.*  And,  if  wheat  be  suffi- 
ciently scarce,  and  in  sufficient  request  to  make  tillage  more  profita- 
ble than  grazing,  legislative  interference  is  superfluous  altogether; 
for  self-interest  will  make  the  producer  turn  his  attention  to  the 
former. 

The  only  question  then  is,  which  is  the  most  likely  to  know  what 
kind  of  cultivation  yields  the  largest  returns,  the  cultivator  or  the 
government  •,  and  we  may  fairly  take  it  for  granted,  that  the  culti- 
vator, residing  on  the  spot,  making  it  the  object  of  constant  study 
and  inquiry,  and  more  interested  in  success  than  anybody,  is  better 
informed  in  this  respect  than  the  government. 

•--"-"" •     •  •  0  ' 

*  At  the  disastrous  period  in  question,  there  was  no  actual  want  of  wheat; 
the  growers  merely  felt  a  disinclination  to  sell  for  paper  money.  Wheat  was 
sold  for  real  value  at  a  very  reasonable  rate ;  and,  though  a  hundred  thousand 
ncres  of  pasture  land  had  been  converted  into  arable,  the  disinclination  to 
exchange  wheat  for  a  discredited  paper-money  would  not  have  been  a  jot 
-oiluced 


CHAP.  XVII.  ON  PRODUCTION.  145 

Should  it  be  insisted  upon  in  argument,  that  the  cultivator  knows 
only  the  price-current  of  the  day,  and  does  not,  like  the  government, 
provide  for  the  future  wants  of  the  people,  it  may  be  answered,  that 
one  of  the  talents  of  a  producer,  and  a  talent  his  own  interest  obliges 
him  assiduously  to  cultivate,  is  not  the  mere  knowledge,  but  the  fore- 
knowledge, of  human  wants.* 

An  evil  of  the  same  description  was  occasioned,  when,  at  another 
period,  the  proprietors  were  compelled  to  cultivate  beet-root,  or 
woad  in  lieu  of  grain :  indeed,  we  may  observe,  en  passant,  that  it 
is  always  a  bad  speculation  to  attempt  raising  the  products  of  the 
torrid,  under  the  sun  of  the  temperate  latitudes.  The  saccharine  and 
colouring  juices,  raised  on  the  European  soils,  with  all  the  forcing  in 
the  world,  are  very  inferior  in  quantity  and  quality  to  those  That 
grow  in  profusion  in  other  climates  ;f  while,  on  the  other  hand,  those 
soils  yield  abundance  of  grain  and  fruits  too  bulky  and  heavy  to  be 
imported  from  a  distance.  In  condemning  our  lands  to  the  growth 
of  products  ill  suited  to  them,  instead  of  those  they  are  better  calcu- 
lated for,  and,  consequently,  buying  very  dear  what  we  might  have 
cheap  enough,  if  we  would  consent  to  receive  them  from  places 
where  they  are  produced  with  advantage,  we  are  ourselves  the 
victims  of  our  own  absurdity.  It  is  the  very  acme  of  skill,  to  turn 
the  powers  of  nature  to  best  account,  and  the  height  of  madness  to 
contend  against  them ;  which  is  in  fact  wasting  part  of  our  strength, 
in  destroying  those  powers  she  designed  for  our  aid. 

Again,  it  is  laid  down  as  a  maxim,  that  it  is  better  to  buy  products 
dear,  when  the  price  remains  in  the  country,  than  to  get  them  cheap 
from  foieign  growers.  On  this  point  I  must  refer  my  readers  to  that 
analysis  of  production  which  we  have  just  gone  through.  It  will 
there  be  seen,  that  products  are  not  to  be  obtained  without  some 
sacrifice, — without  the  consumption  of  commodities  and  productive 
services  in  some  ratio  or  other,  the  value  of  which  is  in  this  way 
as  completely  lost  to  the  community,  as  if  it  were  to  be  exported.J 

*  Of  course,  in  extraordinary  cases,  like  that  of  a  siege  or  a  blockade,  ordinary 
rules  of  conduct  must  be  disregarded.  However  irksome  the  necessity,  violent 
obstructions  to  the  natural  course  of  human  affairs  must  be  removed  by  counter- 
acting violence;  poison  is  in  dangerous  cases  resorted  to  as  a  medicine;  but  these 
remedies  require  extreme  care  and  skill  in  the  application. 

f  M.  de  Humboldt  has  remarked,  that  seven  square  leagues  of  land  in  a 
tropical  climate,  can  furnish  as  much  sugar  as  the  utmost  consumption  of  France, 
in  its  best  days,  has  ever  required. 

}  In  the  sequel  of  this  chapter,  it  will  be  shown,  that  values  exported  give 
precisely  the  same  encouragement  to  domestic  industry,  as  if  they  are  consumed 
at  home.  In  the  instance  just  cited,  suppose  that  wine  had  been  grown  instead 
of  the  sugar  of  beet-root,  or  the  blue  dye  of  woad,  the  domestic  and  agricultural 
industry  of  the  nation  would  have  been  quite  as  much  encouraged.  And,  since 
the  product  would  have  been  more  congenial  to  the  climate,  the  wine  produced 
from  the  same  land  would  have  procured  a  larger  quantity  of  colonial  susrar 
and  indigo  through  the  channel  of  commerce,  even  if  conducted  by  neutral*  or 
enemies.  The  colonial  sugar  and  indigo  would  have  been  equally  the  product 
of  our  own  land,  though  first  assuming  the  shape  of  wine;  only  the  same  space 
of  land  would  have  produced  them  in  superior  quantity  and  quality.  And  the 
encouragement  to  domestic  industry  would  be  the  same,  or  rather  would  b* 
13  T 


146  ON  PRODUCTION.  BOOK  L 

I  can  hardly  suppose  any  government  will  be  bold  enough  to 
object,  that  it  is  indifferent  about  the  profit,  which  might  be  derived 
from  a  more  advantageous  production,  because  it  would  fall  to  the 
lot  of  individuals.  The  worst  governments,  those  which  set  up  their 
own  interest  in  the  most  direct  opposition  to  that  of  their  subjects, 
have  by  this  time  learnt,  that  the  revenues  of  individuals  are  the 
regenerating  source  of  public  revenue ;  and  that,  even  under  despotic 
and  military  sway,  where  taxation  is  mere  organized  spoliation,  the 
subjects  can  pay  only  what  they  have  themselves  acquired. 

The  maxims  we  have  been  applying  to  agriculture  are  equally 
applicable  to  manufacture.  Sometimes  a  government  entertains  o 
notion,  that  the  manufacture  of  a  native  raw  material  is  better  for 
the  national  industry,  than  the  manufacture  of  a  foreign  raw  material. 
It  is  in  conformity  to  this  notion,  that  we  have  seen  instances  of 
preference  given  to  the  woollen  and  linen  above  the  cotton  manufac- 
ture. By  this  conduct  we  contrive,  as  far  as  in  us  lies,  to  limit  the, 
bounty  of  nature,  which  pours  forth  in  different  climates  a  variety 
of  materials  adapted  to  our  innumerable  wants.  Whenever  human 
efforts  succeed  in  attaching  to  these  gifts  of  nature  a  value,  that  is  to 
say,  a  degree  of  utility,  whether  by  their  import,  or  by  any  modifi- 
cation we  may  subject  them  to,  a  useful  act  is  performed,  and  an 
item  added  to  national  wealth.  The  sacrifice  we  make  to  foreigners 
in  procuring  the  raw  material  is  not  a  whit  more  to  be  regretted, 
than  the  sacrifice  of  advances  and  consumption,  that  must  be  made 
in  every  branch  of  production,  before  we  can  get  a  new  product. 
Personal  interest  is,  in  all  cases,  the  best  judge  of  the  extent  of  the 
sacrifice,  and  of  the  indemnity  we  may  expect  for  it ;  and,  although 
this  guide  may  sometimes  mislead  us,  it  is  the  safest  in  the  long-run, 
as  well  as  the  least  costly.* 

But  personal  interest  is  no  longer  a  safe  criterion,  if  individual 

greater ;  because  a  product  of  superior  value  would  reward  more  amply  the 
agency  of  the  land,  capital,  and  industry,  engaged  in  the  production. 

*  One  is  obliged  every  moment  to  turn  round  and  combat  objections,  that 
ne\  er  could  have  been  started,  if  the  science  of  political  economy  had  been  more 
widely  diffused.  It  will  here,  for  instance,  in  all  probability,  be  said, — granting 
that  the  sacrifice  made  in  the  purchase  of  the  raw  flax  for  manufacture,  and  that 
made  in  the  purchase  of  cotton,  is  to  the  manufacturer  or  merchant  equal  in  the 
one  case  and  the  other, — still,  in  the  one  case,  the  amount  of  the  sacrifice  is  ex 
pended  and  consumed  in  the  nation  itself,  and  conduces  to  the  national  advan- 
tage ;  in  the  other,  the  whole  advantage  goes  to  the  foreign  grower.  I  answer, 
the  advantage  goes  to  the  nation  in  either  case ;  for  the  foreign  raw  material, 
cotton,  cannot  be  purchased,  except  with  a  domestic  product,  which  must  be 
bought  of  the  national  grower  before  the  merchant  can  go  to  market ;  whether 
flax  or  any  thing  else,  it  must  be  some  value  of  domestic  creation.  Why  may 
he  not  buy  with  money  ?  Money  itself  must  have  been  originally  purchased 
with  some  other  product,  which  must  have  employed  domestic  industry,  as  much 
us  the  growth  of  flax.  Turn  it  which  way  you  will,  it  comes  to  the  same  thing 
in  the  end.  Wealth  can  only  be  acquired  by  the  production  of  value,  or  lost 
by  its  consumption ;  and,  putting  absolute  robbery  out  of  the  question,  the  whole 
consumption  of  a  navion  must  always  be  supplied  from  its  internal  resources,  its 
land,  capital,  and  industry,  even  that  portion  of  it  which  falls  upon  external 
objects. 


CHAP  XVII.  ON  PRODUCTION.  147 

interests  are  not  left  to  counteract  and  control  each  other.  If  one 
individual,  or  one  class,  can  call  in  the  aid  of  authority  to  ward  oft' 
the  effects  of  competition,  it  acquires  a  privilege  to  the  prejudice  and 
at  the  cost  of  the  whole  community ;  it  can  then  make  sure  of  profits 
not  altogether  due  to  the  productive  services  rendered,  but  composed 
in  part  of  an  actual  tax  upon  consumers  for  its  private  profit ;  which 
tax  it  commonly  shares  with  the  authority  that  thus  unjustly  lends 
its  support. 

The  legislative  body  has  great  difficulty  in  resisting  the  importu- 
nate demands  for  this  kind  of  privileges ;  the  applicants  are  the  pro- 
ducers that  are  to  benefit  thereby,  who  can  represent,  with  much 
plausibility,  that  their  own  gains  are  a  gain  to  the  industrious  classes, 
and  to  the  nation  at  large,  their  workmen  and  themselves  being 
members  of  the  industrious  classes,  and  of  the  nation.* 

When  the  cotton  manufacture  was  first  introduced  in  France,  all 
the  merchants  of  Amiens,  Rheims,  Beauvais,  &c.  joined  in  loud 
remonstrances,  and  represented,  that  the  industry  of  these  towns 
was  annihilated.  Yet  they  do  not  appear  less  industrious  or  rich 
than  they  were  fifty  years  ago ;  while  the  opulence  of  Rouen  and 
all  Normandy  has  been  wonderfully  increased  by  the  new  fabric. 

The  outcry  was  infinitely  greater,  when  printed  calicoes  first 
came  into  fashion ;  all  the  chambers  of  commerce  were  up  in  arms; 
meetings,  discussions  everywhere  took  place ;  memorials  and  depu- 
tations poured  in  from  every  quarter,  and  great  sums  were  spent  in 
the  opposition.  Rouen  now  stood  forward  to  represent  the  misery 
about  to  assail  her,  and  painted,  in  moving  colours,  "old  men, 
women,  and  children,  rendered  destitute;  the  best  cultivated  lands 
in  the  kingdom  lying  waste,  and  the  whole  of  a  rich  and  beautiful 
province  depopulated."  The  city  of  Tours  urged  the  lamentations 
of  the  deputies  of  the  whole  kingdom,  and  foretold  "a  commotion 
that  would  shake  the  frame  of  social  order  itself."  Lyons  could  not 
view  in  silence  a  project  "  which  filled  all  her  manufactories  with 
alarm."  Never  on  so  important  an  occasion  had  Paris  presented 
itself  at  the  foot  of  a  throne,  "  watered  with  the  tears  of  commerce." 
Amiens  viewed  the  introduction  of  printed  calicoes  as  the  gulf  that 
must  inevitably  swallow  up  all  the  manufactures  of  the  kingdom. 
The  memorial  of  that  city,  drawn  up  at  a  joint  meeting  of  the  three 
corporations,  and  signed  unanimously,  ended  in  these  terms:  "To 
conclude,  it  is  enough  for  the  eternal  prohibition  of  the  use  of  printed 
calicoes,  that  the  whole  kingdom  is  chilled  with  horror  at  the  news 
of  their  proposed  toleration.  Fox  populi  vox  dei." 

Hear  what  Roland  de  la  Platiere,  who  had  the  presentation  of 
these  remonstrances  in  quality  of  inspector-general  of  manufactures, 
says  on  this  subject,  "Is  there  a  single  individual  at  the  present 

*  No  one  cries  out  against  them,  because  very  few  know  *ho  it  is  that  pays, 
t.he  gains  of  the  monopolist.  The  real  sufferers,  the  consumers  themselves,  often 
feelthe  pressure,  without  being  aware  of  the  cause  of  it,  and  are  the  first  ui 
abuse  the  enlightened  individuals,  who  are  really  advocating  their  interests. 


148  ON  PRODUCTION.  BOOK  L 

moment,  who  is  mad  enough  to  deny,  that  the  fahric  of  printed  cali- 
coes employs  an  immense  number  of  hands,  what  with  the  dressing 
of  cotton,  the  spinning,  weaving,  bleaching,  and  printing?  This 
article  has  improved  the  art  of  dyeing  in  a  few  years,  more  than  all 
the  other  manufactures  together  have  done  in  a  century." 

I  must  beg  my  readers  to  pause  a  moment,  and  reflect,  what  firm- 
ness and  extensive  information  respecting  the  sources  of  public  pros- 
perity were  necessary  to  uphold  an  administration  against  so  general 
a  clamour,  supported,  amongst  the  principal  agents  of  authority,  by 
other  motives,  besides  that  of  public  utility. 

Though  governments  have  too  often  presumed  upon  their  power 
to  benefit  the  general  wealth,  by  prescribing  to  agriculture  and 
manufacture  the  raising  of  particular  products,  they  have  interfered 
much  more  particularly  in  the  concerns  of  commerce,  especially  of 
external  commerce.  These  bad  consequences  have  resulted  from  a 
general  system,  distinguished  by  the  name  of  the  exclusive  or  mer- 
cantile system,  which  attributes  the  profits  of  a  nation  to  what  is 
technically  called  a  favourable  balance  of  trade.  Before  we  enter 
upon  the  investigation  of  the  real  effect  of  regulations,  intended  to 
secure  to  a  nation  this  balance  in  its  favour,  it  may  be  as  well  to 
form  some  notion  of  what  it  really  is,  and  what  is  its  professed 
object ;  which  I  shall  attempt  in  the  following 

DIGRESSION, 
UPON  WHAT  IS  CALLED  THE  BALANCE  OF  TRADE. 

The  comparison  a  nation  makes  between  the  value  of  its  exports 
to,  and  that  of  its  imports  from,  foreign  countries,  forms  what  is 
called  the  balance  of  its  trade.  If  it  have  exported  more  commodi- 
ties than  it  has  imported,  it  is  taken  for  granted  that  the  nation  has 
to  receive  the  difference  in  gold  and  silver;  and  the  balance  of  trade 
is  then  said  to  be  in  its  favour;  and  when  the  case  is  reversed,  the 
balance  is  said  to  be  against  it. 

The  exclusive  system  proceeds  upon  these  maxims:  1.  That  the 
commerce  of  a  nation  is  advantageous,  in  proportion  as  its  exports 
exceed*  its  imports,  and  as  there  is  a  larger  cash  balance  receivable 
in  specie,  or  in  the  precious  metals :  2.  That  by  means  of  duties, 
prohibitions,  and  bounties,  the  government  can  make  that  balance 
more  in  favou.  of,  or  less  against,  the  nation. 

These  two  maxims  must  be  analysed  minutely  in  the  first  place; 
then,  let  us  see  what  is  the  course  of  practice. 

When  a  merchant  sends  goods  abroad,  he  causes  them  to  be  there 
sold,  and  receives,  by  the  hands  of  his  foreign  correspondents,  the 
]  trice  of  his  goods,  in  the  money  of  the  country.  If  he  expects  to 
make  a  profit  upon  the  return  cargo,  he  causes  that  price  to  be  laid 
nut  in  foreign  produce,  and  remitted  home  to  him.  The  operation 
is  witn  i'lttle  variation  the  same,  when  he  begins  at  the  other  end; 
that  is  to  say,  by  making  purchases  abroad,  which  he  pays  for  by 


CHAP.  XVH.  ON  PRODUCTION.  149 

remitting  domestic  products  thither.  These  operations  are  not 
always  executed  on  account  of  the  same  merchant.  It  sometimes 
happens  that  the  trader,  who  undertakes  the  outward,  will  not  under- 
take the  homeward  adventure.  In  that  case  he  draws  bills  payable 
after  date,  or  upon  sight,  upon  his  correspondents,  by  whom  the 
goods  have  been  sold;  these  bills  he  sells  or  negotiates,  to  somebody, 
who  sends  them  to  the  place  they  are  drawn  upon,  where  they  are 
made  use  of  in  the  purchase  of  fresh  goods,  which  the  last  mention- 
ed person  imports  himself.* 

In  both  cases,  one  value  is  exported,  another  value  is  imported  in 
return ;  but  we  have  not  to  stop  to  inquire,  if  any  part  of  the  value 
either  exported  or  imported  consisted  of  the  precious  metals.  It 
may  reasonably  be  assumed,  that  merchants,  when  left  the  free 
choice  of  what  goods  they  will  speculate  in,  will  prefer  those  that 
offer  the  largest  profit ;  that  is  to  say,  those  which  will  bear  the 
greatest  value  when  they  arrive  at  the  place  of  destination.  For 
example,  a  French  merchant  has  consigned  brandies  to  England, 
and  has  to  receive  from  England  for  such  his  consignment,  1000/. 
sterling :  he  naturally  sits  down  to  calculate  the  difference  between 
what  he  will  receive,  if  he  import  his  1000/.  in  the  shape  of  the 
precious  metals,  and  what  he  will  receive,  if  he  import  that  sum  in 
the  shape  of  cotton  manufactures-! 

*  What  has  been  said  of  one  trader,  may  be  said  equally  of  two — three, — in 
short,  of  all  the  traders  in  the  nation.  As  for  as  concerns  the  balance  of  com- 
merce, the  operations  of  the  whole  will  resolve  themselves  into  what  I  have 
just  stated.  Individual  losses  may  occur  on  either  side,  from  the  folly  or  knavery 
of  some  few  of  the  traaers  engaged ;  but  we  may  take  it  for  granted,  that  they 
will,  on  the  average,  be  inconsiderable,  in  comparison  with  the  total  of  business 
done ;  at  all  events,  the  losses  on  the  one  side  wjjl  commonly  balance  those  on 
the  other. 

It  is  of  very  little  importance  to  our  purpose  to  inquire,  by  whom  the  charge 
Df  transport  is"  borne :  usually,  the  English  trader  pays  the  freight  of  the  goods 
he  buys,  and  imports  from  France,  and  the  French  trader  does  the  same  upon  his 
purchases  from  England ;  both  of  them  look  for  the  reimbursement  of  this  outlay 
to  the  value  added  to  the  articles  by  the  circumstance  of  transport. 

f  It  may  be  well  here  to  point  out  a  manifest  blunder  of  some  partisans  of  the 
exclusive  system.  They  look  upon  nothing  that  a  nation  receives  from  abroad  as 
a  national  gain,  except  what  is  received  in  the  form  of  specie ;  which  is  in  effect, 
to  maintain,  that  a  hatter  who  sells  a  hat  for  5  dollars  gains  the  whole  5  dollars, 
because  he  receives  it  in  specie.  But  this  cannot  be ;  money,  like  other  things, 
is  itself  a  commodity.  A  French  merchant  consigns  to  England,  brandies  to 
the  amount  of  20,000  jr. :  his  commodity  was  equivalent  in  France  to  that  sum  in 
specie ;  if  it  sell  in  England  for  1000Z.  sterling,  and  that  sum  remitted  in  gold  or 
silver  be  worth  24,000  fr.  there  is  a  gain  of  4000  fr.  only,  although  France  has 
received  24,000  fr.  in  specie.  And,  should  the  merchant  lay  out  his  1000/. 
sterling  in  cotton  goods,  and  be  able  to  sell  them  in  France  for  28,000  fr.  thero 
would  then  be  a  gain  to  the  importer  and  to  the  nation  of  8000  fr.,  although  no 
specie  whatever  had  been  brought  into  the  country.  In  short,  the  gain  is  pre- 
cisely the  excess  of  the  value  received  above  the  value  given  for  it,  whatever  be 
the  form  in  which  the  import  is  made. 

It  is  curious  enough,  that  the  more  lucrative  external  commerce  is,  the  greater 
must  be  the  excess  of  the  import  above  the  export ;  and  that  the  very  thing, 
which  the  partisans  of  the  exclusive  system  deprecate  as  a  calamity,  is  of  ail 
13* 


150  ON  PRODUCTION.  BOOK! 

If  the  merchant  find  it  more  advantageous  to  get  his  returns  in 
goods  than  in  specie,  and  if  it  be  admitted,  that  he  knows  his  own 
aiterest  better  than  anybody  else,  the  sole  point  left  for  discussion 
is,  whether  returns  in  specie,  though  less  advantageous  to  the  mer- 
chant, may  not  be  better  for  the  nation,  than  returns  of  any  other 
article :  whether,  in  short,  it  be  desirable  in  a  national  point  of  view, 
that  the  precious  metals  should  abound,  in  preference  to  any  other 
commodity. 

What  are  the  functions  of  the  precious  metals  in  the  community  I 
If  shaped  into  trinkets  or  plate,  they  serve  for  personal  ornament,  for 
the  splendour  of  our  domestic  establishments,  or  for  a  variety  of 
domestic  purposes ;  they  are  converted  into  watch-cases,  spoons, 
forks,  dishes,  coffee-pots  ;  or  rolled  out  into  leaves  for  the  embellish- 
ment of  picture  frames,  book-binding,  and  the  like ;  in  which  case, 
they  form  part  of  that  portion  of  the  capital  of  the  community,  which 
yields  no  interest,  but  is  devoted  to  the  production  of  utility  or  plea- 
sure. It  is  doubtless  an  advantage  to  the  nation,  that  the  material, 
whereof  this  portion  of  its  capital  consists,  should  be  cheap  and  abun- 
dant. The  enjoyment  they  afford  in  these  various  ways  is  then 
obtained  at  a  lower  rate,  and  is  more  widely  diffused.  There  are 
many  establishments  on  a  moderate  scale,  which,  but  for  the  disco- 
very of  America,  would  have  been  unable  to  make  the  show  of  plate 
that  is  now  seen  upon  their  tables.  But  this  advantage  must  not  be 
over-rated ;  there  are  other  utilities  of  a  much  higher  order.  The 

things  to  be  desired.  I  will  explain  why.  When  there  has  been  an  export  of 
10,  and  an  import  in  return  of  11  millions,  there  is  in  the  nation  a  value  of  1  mil- 
lion more  than  before  the  interchange.  And,  in  spite  of  the  specious  statements 
of  the  balance  of  commerce,  this  must  almost  always  be  so,  otherwise  the  traders 
would  gain  nothing.  In  fact,  the  value  of  the  export  is  estimated  at  its  value 
before  shipment,  which  is  increased  by  the  time  it  reaches  its  destination :  with 
this  augmented  value  the  return  is  purchased,  which  also  receives  a  like  acces- 
sion of  value  by  the  transport.  The  value  of  this  import  is  estimated  at  the  time 
of  entry.  Thus,  the  result  is  the  presence  of  a  value  equal  to  that  exported,  plus 
the  gains  outward  and  homeward.  Wherefore,  in  a  thriving  country,  the  value 
of  the  total  imports  should  always  exceed  that  of  the  exports.  What  then  are 
we  to  think  of  the  Report  of  the  French  Minister  of  the  Interior  of  1813,  who 
makes  the  total  exports  to  have  been  383  millions  of  francs,  and  the  total  imports, 
exclusive  of  specie,  but  350  millions  ;  a  statement  upon  which  he  felicitates  a 
nation,  as  the  most  favourable  that  had  ever  been  presented.  Whereas,  thn 
balance  shows,  on  the  contrary,  what  everybody  felt  and  knew,  that  the  com- 
merce of  France  was  then  making  immense  losses,  in  consequence  of  the  blun- 
ders of  her  administration,  and  the  total  ignorance  of  the  first  principles  of  poli- 
tical economy. 

In  a  tract  upon  the  kingdom  of  Navarre  in  Spain,  (Annales  des  Voyages,  torn. 
l.  p.  312,)  I  find  it  stated,  that,  on  the  comparison  of  the  value  of  the  exports  with 
that  of  the  imports  of  that  kingdom,  there  is  found  to  be  an  annual  excess  of  the 
former  above  the  latter  of  120,000  dollars.  Upon  which  the  author  very  sagely 
•observes,  "  that  if  there  be  one  truth  more  indisputable  than  another,  it  is  this, 
that  a  nation  which  is  growing  rich  cannot  be  importing  more  than  it  is  export- 
mg,  for  then  its  capital  must  diminish  perceptibly.  And,  since  Navarre  is  in  a 
state  of  gradual  improvement,  as  appears  from  the  advance  of  population  and 
Comfort,  it  is  clear," — that  I  know  nothing  about  the  matter,  he  might  have 
tdded; — "  for  I  am  citing  an  established  fact  to  give  the  lie  to  an  indisputable 
principle."  \V  e  are  every  day  witnessing  contradictions  of  the  same  kind. 


CHAP.  XVII.  ON  PRODUCTION.  J51 

window-glass,  that  keeps  out  the  inclemency  of  the  weather,  is  of 
much  more  importance  to  our  comfort,  than  any  species  of  plate 
whatsoever ;  yet  no  one  has  ever  thought  of  encouraging  its  import 
or  production  by  special  favour  or  exemptions. 

The  other  utility  of  the  precious  metals  is,  to  act  as  the  material 
of  money,  that  is  to  say,  of  that  portion  of  the  national  capital, 
which  is  employed  in  facilitating  the  interchange  of  existing  values 
between  one  individual  and  another.  For  this  purpose,  is  it  any 
advantage  that  the  material  selected  should  be  abundant  and  cheap ? 
Is  a  nation,  that  is  more  amply  provided  with  that  material,  richer 
than  one  which  is  more  scantily  supplied  ? 

I  must  here  take  leave  to  anticipate  a  position,  established  in 
Chap.  XXI.  of  this  book,  wherein  the  subject  of  money  is  considered, 
namely,  that  the  total  business  of  national  exchange  and*circulation, 
requires  a  given  quantity  of  the  commodity,  money,  of  some  amount 
or  other.  There  is  in  France  a  daily  sale  of  so  much  wheat,  cattle, 
fuel,  property  movable  and  immovable,  which  sale  requires  the 
daily  intervention  of  a  given  value  in  the  form  of  money,  because 
every  commodity  is  first  converted  into  money,  as  a  step  towards  its 
further  conversion  into  other  objects  of  desire.  Now,  whatever  be 
the  relative  abundance  or  scarcity  of  the  article  money,  since  a  given 
quantum  is  requisite  for  the  business  of  circulation,  the  money  must 
of  course  advance  in  value,  as  it  declines  in  quantity,  and  decline 
in  value  as  it  advances  in  quantity.  Suppose  the  money  of  France 
to  amount  now  to  3000  millions  of  francs,*  and  that  by  some  event, 
no  matter  what,  it  be  reduced  to  1500  millions;  the  1500  millions 
will  be  quite  as  valuable  as  the  3000  millions.  The  demands  of 
circulation  require  the  agency  of  an  actual  value  of  3000  millions ; 
that  is  to  say,  a  value  equivalent  to  2000  millions  of  pounds  of  sugar, 
(taking  sugar  at  30  sous  per  Ib.)  or  to  180  millions  of  hectolitres  of 
wheat  (taking  wheat  at  20  fr.  the  hectolitre).  Whatever  be  the 
weight  or  bulk  of  the  material,  whereof  it  is  made,  the  total  value  of 
the  national  money  will  still  remain  at  that  point ;  though  in  the  latter 
case,  that  material  will  be  twice  as  valuable  as  in  the  former.  An 
ounce  of  silver  will  buy  eight  instead  of  four  Ibs.  of  sugar,  and  so 
of  all  other  commodities;  and  the  1500  millions  of  coin  will  be  equiva- 
lent to  the  former  3000.  But  the  nation  will  be  neither  richer  nor 
poorer  than  before.  A  man  who  goes  to  market  with  a  less  quantity 
of  coin,  will  be  able  to  buy  with  it  the  same  quantity  of  commodities. 
A  nation  that  has  chosen  gold  for  the  material  of  its  money,  is  equally 
rich  with  one  that  has  made  choice  of  silver,  though  the  volume  of 
its  money  be  much. less.  Should  silver  become  fifteen  times  as 
scarce  as  at  present,  that  is  to  say,  as  scarce  as  gold  now  is,  an  ounce 
of  silver  would  perform  the  same  functions,  in  the  character  of  money, 
as  an  ounce  of  gold  now  does;  and  we  should  be  equally  rich  in 
money.  Or,  should  it  fall  to  a  par  with  copper,  we  should  not  be  a. 

*564  millions  of  dollars. 


152  ON  PRODUCTION.  BOOK  L 

iot  the  richer  in  the  article  of  money ;  we  should  merely  be  encum- 
bered with  a  more  bulky  medium  of  circulation. 

On  the  score,  then,  of  the  other  utilities  of  the  precious  metals,  and 
on  that  score  only,  their  abundance  makes  a  nation  richer,  because  it 
extends  the  sphere  of  those  utilities,  and  diffuses  their  use.  In  the 
cnaracter  of  money,  that  abundance  no  wise  contributes  to  national 
enrichment;*  but  the  habits  of  the  vulgar  lead  them  to  pronounce  an 
individual  rich,  in  proportion  to  the  quantity  of  money  he  is  possess- 
ed of;  and  this  notion  has  been  extended  to  national  wealth,  which 
is  made  up  of  the  aggregate  of  individuals'  wealth.  Wealth,  how- 
ever, as  before  observed,  consists,  not  in  the  matter  or  substance,  but 
in  the  value  of  that  matter  or  substance.  A  money  of  large,  is  worth 
no  more  than  a  money  of  small  volume ;  neither  is  a  money  of  small, 
of  less  valje  than  one  of  large  volume.  Value,  in  the  form  of  com- 
modities, is  equivalent  to  value  to  the  same  amount  in  the  form  of 
money. 

It  may  be  asked,  why,  then,  is  money  so  generally  preferred  to 
commodities,  when  the  value  on  both  sides  is  equal  ?  This  requires 
a  little  explanation.  When  I  come  to  treat  of  money,  it  will  be 
shown,  that  the  coined  metal  of  equal  value  commands  a  preference, 
because  it  insures  to  the  holder  the  attainment  of  the  objects  of  desire 
by  means  of  one  exchange  instead  of  two.  He  is  not,  like  the  holder 
of  any  other  commodity?  obliged,  in  the  first  instance,  to  exchange 
his  own  commodity,  money,  for  the  purpose  of  obtaining,  by  a 
second  exchange,  the  object  of  his  desire ;  one  act  of  exchange  suf- 
fices ;  and  this  it  is,  combined  with  the  extreme  facility  of  apportion- 
ment, afforded  by  graduated  denominations  of  the  coin,  which  ren- 
ders it  so  useful  in  exchanges  of  value.  Every  individual,  who  has 
an  exchange  to  make,  becomes  a  consumer  of  the  commodity, 
money ;  that  is  to  say,  every  individual  in  the  community ;  which 
accounts  for  the  universal  preference  of  money  to  commodities  at 
large,  where  the  value  is  equal. 

*  It  is  a  necessary  inference  from  these  positions,  that  a  nation  gains  in  wealth 
by  the  partial  export  of  its  specie,  because  the  residue  is  of  equal  value  to  the 
total  previous  amount,  and  the  nation  receives  an  equivalent  for  the  portion  ex- 
ported. How  is  this  to  be  accounted  for  1  By  the  peculiar  property  of  money 
to  exhibit  its  utility  in  the  exercise,  not  of  its  physical  or  material  qualities,  but 
those  of  its  value  alone.  A  less  quantity  of  bread  will  less  satisfy  the  cravings 
of  hunger;  but  a  less  quantity  of  money  may  possess  an  equal  amount  of  utility; 
for  its  value  augments  with  the  diminution  of  its  volume,  and  its  value  is  the 
sole  ground  of  its  employment. 

Whence  it  is  evident,  that  governments  should  shape  their  course  in  the  op- 
posite direction  to  that  pursued  at  present,  and  encourage,  instead  of  discouraging, 
the  export  of  specie.  And  so  they  assuredly  will,  when  they  shall  understand 
their  business  better :  or  rather,  they  will  attempt  neither  the  one  nor  the  other, 
lor  it  is  impossible  that  any  considerable  portion  of  the  national  specie  can  leave 
the  country,  without  raising  the  value  of  the  residue.  And  when  it  is  raised, 
less  of  it  is  given  in  exchange  for  commodities,  which  are  then  low  in  price,  so 
as  to  make  it  advantageous  again  to  import  specie  and  export  commodities,  by 
»vhich  action  and  reaction  the  quantity  of  the  precious  metals  is,  in  spite  of  all 
regulations,  kept  pretty  nearly  at  the  amount  required  by  the  wants  of  the  nation. 


CHAP.  XVII.  ON  PRODUCTION.  153 

But  this  superiority  of  money,  in  the  interchange  between  indi- 
viduals, does  not  extend  to  that  between  nation  and  nation.  In  the 
latter,  money,  and,  d.  fortiori,  bullion,  lose  all  the  advantage  of  their 
peculiar  character,  as  money,  and  are  dealt  with  as  mere  commodi- 
ties. The  merchant,  who  has  remittances  to  make  from  abroad, 
looks  at  nothing  but  the  gain  to  be  made  on  those  remittances,  and 
treats  the  precious  metals  as  a  commodity  he  can  dispose  of  with 
more  or  less  benefit.  In  his  eyes,  an  exchange  more  or  less  is  no 
object ;  for  it  is  his  business  to  negotiate  exchanges,  so  as  to  get  a 
profit  upon  them.  An  ordinary  person  might  prefer  to  receive 
money  instead  of  goods,  because  it  is  an  article,  whose  value  he  is 
better  acquainted  with:  but  a  merchant,  who  is  apprised  of  the 
prices  current  in  most  of  the  markets  of  the  world,  knows  how  to 
appreciate  the  value  he  receives  in  return,  whatever  shape  it  may 
appear  under. 

An  individual  may  be  under  the  necessity  of  liquidating,  for  the 
purpose  of  giving  a  new  direction  to  his  capital,  or  of  partition,  or  the 
like.  A  nation  is  never  obliged  to  do  so.  This  liquidation  is  effected 
with  the  circulating  money  of  the  nation,  which  it  occupies  only  for 
the  time;  the  same  money  going  almost  immediately  to  operate 
another  act  of  liquidation  or  of  exchange. 

We  have  seen  above  (Chap.  XV.)  that  the  abundance  of  specie  is 
not  even  necessary  for  the  national  facilitation  of  exchanges  and 
sales ;  for  that  buyers  really  buy  with  products, — each  with  his 
respective  portion  of  the  products  he  has  concurred  in  creating:  that 
with  this  he  buys  money,  which  serves  but  to  buy  some  further  pro- 
duct; and  that,  in  this  operation,  money  affords  but  a  temporary 
convenience ;  like  the  vehicles  employed  to  convey  to  market  the 
produce  of  a  farm,  and  to  bring  back  the  articles  that  have  been  pur- 
chased with  the  produce.  Whatever  amount  of  money  may  have 
been  employed  in  the  purchase  of  liquidation,  it  has  passed  for  as 
much  as  it  was  taken  for :  and,  at  the  close  of  the  transaction,  the 
individual  is  neither  richer  nor  poorer.  The  loss  or  profit  arises  out 
of  the  nature  of  the  transaction  itself,  and  has  no  reference  to  the 
medium  employed  in  the  course  of  it. 

In  no  one  way  do  the  causes,  that  influence  individual  preference 
of  money  to  commodities,  operate  upon  international  commerce. 
When  the  nation  has  a  smaller  stock  than  its  necessities  require,  its 
value  within  the  nation  is  raised,  and  foreign  and  native  merchants 
are  equally  interested  in  the  importation  of  more:  when  it  is  redundant, 
its  relative  value  to  commodities  at  large  is  reduced,  and  it  becomes 
advantageous  to  export  to  that  spot,  where  its  command  of  commo- 
dities mav  be  greater  than  at  home.  To  retain  it  by  compulsory 
measures,"  is  to  force  individuals  to  keep  what  is  a  burthen  to  them.* 

*  No  one  but  an  entire  stranger  to  these  matters  would  here  be  inclined  to 
object,  that  money  can  never  be  burthensome,  and  is  always  disposed  of  easily 
enough.  So  it  may  be,  indeed,  by  such  as  are  content  to  throw  its  value  away 
altogether,  or  at  least,  to  make  a  disadvantageous  exchange.  A  confectioner 

\s 


154  ON  PRODUCTION.  BOOK  1. 

And  here  1  might,  perhaps,  now  dismiss  the  subject  of  the  balance 
of  trade;  but  such  is  the  prevailing  ignorance  on  this  topic,  and  so 
novel  are  the  views  I  have  been  taking,  even  to  persons  of  the  bet- 
ter classes,  to  writers  and  statesmen  of  the  purest  intentions  and  well 
informed  on  other  points,  that  it  may  be  worth  while  to  put  the 
reader  on  his  guard  against  some  fallacies  which  are  often  set  up  in 
opposition  to  liberal  principles,  and  are  unfortunately  the  ground- 
work of  the  prevailing  policy  of  most  of  the  European  States.  I 
shall  uniformly  reduce  the  objections  to  the  simplest  terms  possible, 
that  their  weight  may  be  the  more  easily  estimated. 

It  is  said,  that,  by  increasing  the  currency  through  the  means  of  a 
favourable  balance  of  trade,  the  total  capital  of  a  nation  is  augmented , 
and,  on  the  contrary,  by  diminishing  it,  that  capital  is  reduced.  Bui 
it  must  be  always  kept  in  mind,  that  capital  consists,  not  of  so  much 
silver  or  gold,  but  of  the  values  devoted  to  reproductive  consump- 
tion, which  values  necessarily  assume  an  infinite  variety  of  succes- 
sive forms.  When  it  is  intended  to  vest  a  given  capital  in  any 
concern,  or  to  place  it  out  at  interest,  the  first  step  is  undoubtedly  to 
realize  the  amount,  by  converting  *  into  ready  money  the  different 

may  give  away  his  sugar-plums,  or  eat  them  himself;  but  in  that  case  he  losea 
he  value  of  them.  It  should  be  observed,  that  the  abundance  of  specie  is  com- 
oatible  with  national  misery ;  for  the  money,  that  goes  to  buy  bread,  must  have 
oeen  bought  itself  with  other  products.  And,  when  production  has  to  contend 
with  adverse  circumstances,  individuals  are  in  great  distress  for  money,  not 
because  that  article  is  scarce,  which  oftentimes  it  is  not,  but  because  the  creation 
of  the  products,  wherewith  it  is  procurable,  can  not  be  effected  with  advantage. 
*  A  merchant's  leger  for  two  successive  years  may  show  him  richer  in  the 
end  of  the  second,  than  at  the  end  of  the  first,  although  possessed  of  a  smaller 
amount  of  specie.  Suppose  the  first  year's  amount  to  stand  thus : — 

Dollars. 

Ground  and  buildings  --------------  8000 

Machinery  and  nv., Cables-    ----- -  4000 

Stock  in  hand 3000 

Balance  of  good  credits  -------------  1000 

Cash  -    - 4000 


Total 20,000 

And  the  second  year's  thus : — 

Dollar.. 

Ground  and  buildings  --------'.-----  8000 

Machinery  and  movables      -.--.--.----  5000 

Stock  in  hand 6000 

Balance  of  good  credits  -------------  2000 

Cash 1000 


Total 22,000 

Exhibiting  an  increase  of  2000  dollars,  although  his  cash  be  reduced  to  one 
quarter  of  the  former  amount. 

A  similar  account,  differing  only  in  the  ratios  of  the  different  items,  might  be 
made  out  for  the  whole  of  the  individuals  in  the  community,  who  »vouid  then  be 
evidently  richer,  though  possessed  of  much  less  specie  or  cash. 


CHAP.  XVII.  ON  PRODUCTION.  155 

values  one  has  at  command.  The  value  of  the  capital,  thus  assuming 
the  transient  form  of  money,  is  quickly  transmuted  by  one  exchange 
after  another  into  buildings,  works,  arid  perishable  substances  requi- 
site for  the  projected  enterprise.  The  ready  money  employed  for 
the  occasion  passes  again  into  other  hands,  for  the  purpose  of  facili- 
tating fresh  exchanges,  as  soon  as  it  has  accomplished  its  momentary 
duty ;  in  like  manner  as  do  many  other  substances,  the  shape  of 
•which  this  capital  successively  assumes.  So  that  the  value  of  capi- 
tal is  neither  lost  nor  impaired  by  parting  with  its  value,  whatever 
material  shape  it  happens  to  be  under,  provided  that  we  part  with  it 
in  a  way  that  ensures  its  renovation. 

Suppose  a  French  deale'r  in  foreign  commodities  to  consign  to  a 
foreign  country  a  capital  of  10,000  dollars  in  specie  for  the  purchase 
of  cotton ;  when  his  cotton  arrives,  he  possesses  20,000  dollars  value 
in  cotton  instead  of  specie,  putting  his  profit  out  of  the  question  for 
the  moment.  Has  anybody  lost  this  amount  of  specie  ?  Certainly 
not:  the  adventurer  has  come  honestly  by  it  A  cotton  manufac- 
turer gives  cash  for  the  cargo ;  is  he  the  loser  of  the  price  1  No, 
surely:  on  the  contrary,  the  article  in  his  hands  will  increase  to  twice 
its  value,  so  as  to  leave  him  a  profit,  after  repaying  all  his  advances. 
If  no  individual  capitalist  has  lost  the  20,000  dollars  exported,  how 
can  the  nation  have  lost  them  ?  The  loss  will  fall  on  the  consumer, 
they  will  tell  you :  in  fact,  all  the  cotton  goods  bought  and  consumed 
will  be  so  much  positive  loss;  but  the  same  consumers  might  have 
consumed  linens  or  woollens  of  exactly  the  same  value,  without  one 
dollar  of  the  20,000  being  sent  out  of  the  country,  and  yet  there 
would  equally  be  a  loss  or  consumption  to  that  amount  of  value. 
The  loss  of  value  we  are  now  speaking  of  is  not  occasioned  by  the 
export,  but  by  the  consumption,  which  might  have  taken  place  without 
any  export  whatever.  I  may,  therefore,  say,- with  the  strictest  truth, 
that  the  export  of  the  specie  has  caused  no  loss  af  all  to  the  nation. 

It  has  been  urged,  with  much  confidence,  that,  had  the  export  of 
20,000  dollars  never  been  made,  France  would  remain  in  possession 
of  that  additional  value ;  in  fact,  that  the  nation  has  lost  the  amount 
twice  over ;  first,  by  the  act  of  export ;  secondly,  by  that  of  con- 
sumption :  whereas,  the  consumption  of  an  indigenous  product  would 
have  entailed  a  single  loss  only.  But  I  answer  as  before,  that  the 
export  of  specie  has  occasioned  no  loss ;  that  it  was  balanced  by 
equivalent  value  imported ;  and  that  it  is  so  certain,  that  nothing  has 
been  lost  except  the  20,000  dollars  worth  of  imported  commodities, 
that  I  defy  any  one  to  point  out  any  other  losers  than  the  consumers 
of  those  commodities.  If  there  has  been  no  loser,  it  is  clear  there 
can  have  been  no  loss. 


Would  you  put  a  stop  to  the  emigration  of  capital?    It  is  not  to 
be  prevented  by  keeping  the  specie  in  the  country.  A  man  resolved  to 
ransfer  his  capital  elsewhere  can  do  it  just  as  effectually  by  the  con- 
ignment  of  goods,  whose  export  is  permitted.*     So  much  the  bet 

*  The  transfer  of  capital  by  bills  on  foreign  countries,  comes  precisely  to  ti?o 


156  ON  PRODUCTION.  BOOK  I. 

ter,  we  may  be  told;  for  our  manufacturers  will  benefit  by  the 
exports.  True ;  but  their  value  exists  no  longer  in  the  nation,  since 
they  bring  back  no  return  wherewith  to  make  new  purchases ;  there 
has  been  a  transfer  of  so  much  capital  from  amongst  you,  to  give 
activity  not  to  your  own,  but  to  some  other  nation's  industry.  This 
is  a  real  ground  of  apprehension.  Capital  naturally  flows  to  those 
places  that  hold  out  security  and  lucrative  employment,  and  gradu- 
ally retires  from  countries  offering  no  such  advantages:  but  it  may 
easily  enough  retire,  without  being  ever  converted  into  specie. 

If  the  export  of  specie  causes  no  diminution  of  national  capital, 
provided  it  be  followed  by  a  corresponding  return,  on  the  other 
hand,  its  import  brings  no  accession  of  capital.  For,  in  reality, 
before  specie  can  be  imported,  it  must  have  been  purchased  by  an 
equivalent  value  exported  for  that  purpose. 

On  this  point  it  has  been  alleged,  that  by  sending  abroad  goods 
instead  of  specie,  a  demand  is  created  for  goods,  and  the  producers 
enabled  to  make  m  profit  upon  their  production.  I  answer,  that, 
even  when  specie  is  sent  abroad,  that  specie  must  have  been  first 
obtained  by  the  export  of  some  indigenous  product;  for,  we  may 
rest  assured,  that  the  foreign  owner  of  it  did  not  give  it  to  the  French 
importer  for  nothing ;  and  France  had  nothing  to  offer  in  the  first 
instance  but  her  domestic  products.  If  the  supply  of  the  precious 
metals  in  the  country  be  more  than  sufficient  for  the  wants  of  the 
country,  it  is  a  fitter  object  of  export  than  another  commodity ;  and, 
if  more  of  the  specie  be  exported  than  the  excess  of  the  supply  above 
the  demand  for  the  purposes  of  circulation,  we  may  calculate  with 
certainty,  that,  since  the  value  of  specie  must  have  been  necessarily 
raised  by  the  exportation,  other  specie  will  be  imported  to  replace 
what  has  been  withdrawn ;  for  the  purchase  of  which  last,  home 
products  must  have  been  sent  abroad,  which  will  have  yielded  a 
profit  to  the  home  producers.  In  a  word,  every  value  sent  out  of 
France,  for  the  purchase  of  foreign  returns  for  the  French  market, 
may  be  resolved  into  a  product  of  domestic  industry,  given  either 
first  or  last,  for  France  has  nothing  else  to  procure  them  with. 

Again,  it  has  been  argued,  that  it  is  better  to  export  consumable 
articles,  as,  for  instance,  manufactures,  and  to  keep  at  home  those 
products  not  liable  to  consumption,  or,  at  least,  not  to  quick  con- 
sumption, such  as  specie.  Yet  objects  of  quick  consumption,  if  more 
in  demand,  are  more  profitable  to  keep  than  objects  of  slower  con- 
sumption. It  would  often  be  doing  a  producer  a  very  poor  service, 
to  make  him  substitute  a  quantity  of  commodities  of  slow  consump- 
tion, for  an  equal  portion  of  his  capital  of  more  rapid  consumption. 
If  an  ironmaster  were  to  contract  for  the  delivery  to  him  of  a 
quantity  of  coal  at  a  day  certain,  and  when  the  day  came  the  coal 
could  not  be  procurable,  and  he  should  be  offered  the  value  in  money 
••n  its  stead,  it  would  be  somewhat  difficult  to  convince  him  of  the 

same  thing1.  It  is  a  mere  Substitute  in  the  place  of  the  individual  making  the 
export  of  commodities,  who  transfers  his  right  to  receive  their  proceeds,  the 
value  of  which  remains  abroad. 


CHAP.  XVII.  ON  PRODUCTION.  157 

service  done  him  by  the  delivery  of  money ;  which  is  an  object  of 
much  slower  consumption  than  the  coal  he  contracted  for.  Should 
a  dyer  send  an  order  for  dying  woods  from  abroad,  it  would  be  a 
positive  injury  to  send  him  gold,  on  the  plea,  that,  with  equal  value, 
it  has  the  advantage  of  greater  durability.  He  had  no  occasion  for 
a  durable  article  whatever ;  what  he  wanted  was  a  substance,  which, 
though  decomposed  in  his  vats,  would  quickly  re-appear  in  the 
colours  of  his  stuffs.* 

If  it  were  no  advantage  to  import  any  but  the  most  durable  items 
of  productive  capital,  there  are  other  very  durable  objects,  such  as 
stone  or  iron,  that  ought  to  share  in  our  partiality  with  silver  and 
gold.  But  the  point  of  real  importance  is,  the  durability,  not  of  any 
particular  substance,  but  of  the  value  of  capital.  Now  the  value  of 
capital  is  perpetuated,  notwithstanding  the  repeated  change  of  the 
material  shape  in  which  it  is  vested.  Nay,  it.  cannot  yield  either 
interest  or  profit,  unless  that  shape  be  continually  varied.  To  con- 
fine it  to  the  single  shape  of  money  would  be  to  condemn  it  to  re- 
main unproductive. 

But  I  will  go  a  step  further,  and,  having  shown  that  there  is  no 
advantage  in  importing  gold  and  silver  more  than  any  other  article 
of  merchandise,  I  will  assert,  that,  supposing  it  were  desirable  to 
have  the  balance  of  trade  always  in  our  favour,  yet  it  is  morally 
impossible  it  should  be  so. 

Gold  and  silver  are  like  all  the  other  substances  that,  in  the  aggre* 
gate,  compose  national  wealth ;  they  are  useful  to  the  community  no 
longer  than  while  they  do  not  exceed  the  national  demand  for  them. 
Any  such  excess  must  make  the  sellers  more  numerous  than  the 
Duyers ;  consequently  must  depress  the  price  in  proportion,  and  thus 
create  a  powerful  inducement  to  buy  in  the  home  market,  in  the 
expectation  of  making  a  profit  upon  the  export.  This  may  be 
illustrated  by  an  example. 

Suppose  for  a  moment  the  internal  traffic  and  national  wealth  of  a 
given  country  to  be  such  as  to  require  the  constant  employ  of  a 
thousand  carriages  of  different  kinds.  Suppose,  too,  that,  by  some 
peculiar  system  of  commerce,  we  should  succeed  in  getting  more 
carriages  annually  imported,  than  were  annually  destroyed  by  wear 
and  tear;  so  that,  at  the  year's  end,  there  should  be  1500  instead  of 
1000;  is  it  not  obvious,  that  there  would  be  in  that  case  500  lying 
by  in  the  repositories  quite  useless,  and  that  the  owners  of  them, 
rather  than  suffer  their  value  to  lie  dormant,  would  undersell  each 
other,  and  even  smuggle  them  abroad  if  it  were  practicable,  in  the 
hope  of  turning  thernto  better  account?  In  vain  would  the  govern- 

*  In  Book  III.,  which  treats  of  consumption,  it  will  be  seen,  that  the  slowei 
kinds  of  unproductive  consumption  are  preferable  to  the  more  rapid  ones.  But, 
in  the  reproductive  branch,  the  more  rapid  are  the  better ;  because,  the  moro 
quickly  the  reproduction  is  effected,  the  less  charge  of  interest  is  incurred,  and 
the  oftener  the  same  capital  can  repeat  its  productive  agency.  The  rapidity  of 
consumption,  moreover,  does  not  affect  external  products  in  particular;  its  d'*- 
advantages  are  equal,  whether  the  product  be  of  home  or  foreign  growth. 
14 


158  ON  PRODUCTION.  BOOK  I. 

nient  conclude  commercial  treaties  for  the  encouragement  of  their 
import :  in  vain  would  it  expend  its  efforts  in  stimulating  the  export 
of  other  commodities,  for  the  purpose  of  getting  returns  in  the  shape 
of  carriages ;  the  more  the  public  authorities  favoured  the  import, 
the  more  anxious  would  individuals  be  to  export. 

As  it  is  with  carriages,  so  is  it  with  specie  likewise.  The  de- 
mand is  limited ;  it  can  form  but  a  part  of  the  aggregate  wealth  of 
the  nation.  That  wealth  can  not  possibly  consist  entirely  of  specie ; 
for  other  things  are  requisite  besides  specie.  The  extent  of  the  de- 
mand for  that  peculiar  article  is  proportionate  to  the  general  wealth; 
in  the  same  manner,  as  a  greater  number  of  carriages  is  wanted  in  a 
rich  than  in  a  poor  country.  Whatever  brilliant  or  solid  qualities 
the  precious  metals  may  possess,  their  value  depends  upon  the  use 
made  of  them,  and  that  use  is  limited.  Like  carriages,  they  have  a 
value  peculiar  to  them ;  a  value  that  diminishes  in  proportion  to  the 
increase  of  their  relative  plenty,  in  comparison  with  the  objects  of 
exchange,  and  increases  in  proportion  to  their  relative  scarcity. 

One  is  told,  that  every  thing  may  be  procured  with  gold  or  silver. 
True ;  but  upon  what  terms?  The  terms  are  less  advantageous,  when 
these  metals  are  forcibly  multiplied  beyond  the  demand ;  hence  their 
strong  tendency  to  emigration  under  such  circumstances.  -The  ex- 
port of  silver  from  Spain  was  prohibited ;  yet  Spain  supplied  all 
Europe  with  it.  In  1812,  the  paper  money  of  England  having 
rendered  superfluous  all  the  gold  money  of  that  country,  and  made 
that  metal  too  abundant  for  its  other  remaining  uses,  its  relative 
value  fell,  and  her  guineas  emigrated  to  France,  in  spite  of  the  ease 
with  which  the  coasts  of  an  island  may  be  guarded,  and  of  the  de- 
nunciation of  capital  punishment  against  the  exporters. 

To  what  good  purpose,  then,  do  governments  labour  to  turn  the 
balance  of  commerce  in  favour  of  their  respective  nations?  To 
none  whatever ;  unless,  perhaps,  to  exhibit  the  show  of  financial 
advantages,  unsupported  by  fact  or  experience.*  How  can  maxims 
so  clear,  so  agreeable  to  plain  common  sense,  and  to  facts  attested  by 
all  who  have  made  commerce  their  study,  have  yet  been  rejected  in 
practice  by  all  the  ruling  powers  of  Europe,f  nay,  even  have  been 

*  The  returns  of  British  commerce  from  the  commencement  of  the  18th  cen- 
tury down  to  the  establishment  of  the  existing1  paper  money  of  that  nation,  show 
a  regular  annual  excess,  more  or  less  received  by  Great  Britain  in  the  shape  of 
epecie,  amounting  altogether  to  the  enormous  total  of  347  millions  sterling 
(more  than  1600  millions  of  dollars.)  If  to  this  be  added  the  specie  already  in 
Great  Britain  at  the  outset,  England  ought  to  have  possessed  a  circulating  me- 
dium of  very  near  400  millions  sterling.  How  happens  it,  then,  that  the  most 
exaggerated  ministerial  calculations  have  never  given  a  larger  total  of  specie 
than  47  millions,  even  at  the  period  of  its  greatest  abundance  1  Vide  Supra, 
Chap.  III. 

f  All  of  them  have  acted  under  the  conviction,  1.  That  the  precious  metals 
are  the  only  desirable  kind  of  wealth,  whereas  they  perform  but  a  secondary 
part  in  its  production :  2.  That  they  have  it  in  their  power  to  cause  their  regular 
influx  by  compulsory  measures.  The  example  of  England  (Vide  note  pre- 
ceding,") will  show  the  little  success  of  the  experiment.  The  pre-eminent  wealth 
of  that  nation,  then,  is  derived  from  some  other  cause  than  the  favourable  bal- 


CHAP.  XVIL  ON  PRODUCTION.  159 

attacked  by  a  number  of  writers,  that  have  evinced  both  genius 
and  information  on  other  subjects?  To  speak  the  truth,  it  is  because 
the  first  principles  of  political  economy  are  as  yet  but  little  known ; 
because  ingenious  systems  and  reasonings  have  been  built  upon  hol- 
low foundations,  and  taken  advantage  of,  on  the  one  hand,  by  in- 
terested rulers,  who  employ  prohibition  as  a  weapon  of  offence  or 
an  instrument  of  revenue ;  and,  on  the  other,  by  the  personal  avarice 
of  merchants  and  manufacturers,  who  have  a  private  interest  in  ex- 
clusive measures,  and  take  but  little  pains  to  inquire,  whether  their 
profits  arise  from  actual  production,  or  from  a  simultaneous  loss 
thrown  upon  other  classes  of  the  community. 

A  determination  to  maintain  a  favourable  balance  of  trade,  that  is 
to  say,  to  export  goods  and  receive  returns  of  specie,  is,  in  fact,  a 
determination  to  have  no  foreign  trade  at  all ;  for  the  nation,  with 
whom  the  trade  is  to  be  carried  on,  can  only  give  in  exchange  what 
it  has  to  give.  If  one  party  will  receive  nothing  but  the  precious 
metals,  the  other  party  may  come  to  a  similar  resolution ;  and,  when 
both  parties  require  the  same  commodity,  there  is  no.  possibility  of 
any  exchange.  Were  it  practicable  to  monopolize  the  precious 
metals,  there  are  few  nations  in  the  world  that  would  not  be  cut  off 
from  all  hope  of  mutual  commercial  relations.  If  one  country  afford 
to  another  what  the  latter  wants  in  exchange,  what  more  would  she 
have  ?  or  in  what  respect  would  gold  be  preferable  ?  for  what  else 
can  it  be  wanted,  than  as  the  means  of  subsequently  purchasing  the 
objects  of  desire? 

The  day  will  come,  sooner  or  later,  when  people  will  wonder  at 
the  necessity  of  taking  all  this  trouble  to  expose  the  folly  of  a 
system,  so  childish  and  absurd,  and  yet  so  often  enforced  at  the 
point  of  the  bayonet(l) 

[END  OF  THE  DIGRESSION  UPON  THE  BALANCE  OF  TRADE.] 

ance  of  her  commerce.  But  what  other  cause  1  Why  from  the  immensity  of 
her  production.  But  to  what  does  she  owe  that  immensity  1  To  the  frugality 
exerted  in  the  accumulation  of  individual  capital ;  to  the  national  turn  for  in- 
dustry and  practical  application ;  to  the  security  of  person  and  property,  the 
facility  of  internal  circulation,  and  freedom  of  individual  agency,  which,  limited 
and  fettered  as  it  is,  is  yet,  on  the  whole,  superior  to  that  of  the  other  European 
states. 

(1)  In  a  note,  here  inserted,  in  the  earlier  editions  of  this  work,  the  American 
editor  referred  to  the  laudable  exertions  made  by  Mr.  Huskisson,  with  the  sup- 
port of  Mr.  Canning  and  other  then  prominent  members  of  the  British  govern- 
ment, to  expose  the  impolicy  and  injustice  of  restrictions  and  prohibitions  on 
commerce,  and  to  the  success  of  some  of  their  measures  to  relieve  the  industry 
of  the  country  from  the  shackles  imposed  in  a  less  enlightened  age.  We  also 
then  quoted  the  observations  of  the  Edinburgh  Review,  "  that  Mr.  Huskisson, 
in  particular,  against  whom  every  species  of  ribald  abuse  had  been  cast,  had 
done  more  to  improve  the  commercial  policy  of  England  during  the  short  period 
Jhat  he  was  President  of  the  Board  of  Trade,  than  all  the  ministers  who  had 
preceded  him  for  the  last  hundred  years.  And  it  ought  to  be  remembered  to  hw 
honour,  that  the  measures  he  suggested,  and  the  odium  thence  arising,  were  not 
proposed  and  incurred  by  him  in  the  view  of  serving  an?  party  purpose,  but  solely 


160  ON  PRODUCTION.  BOOK  I. 

To  resume  our  subject. — We  have  seen,  that  the  very  advantages 
aimed  at  by  the  means  of  a  favourable  balance  of  trade,  are  altogether 
illusory;  and  that,  supposing  them  real,  it  is  impossible  for  a  nation 
permanently  to  enjoy  them.  It  remains  to  be  shown,  what  is  the 
actual  operation  of  regulations  framed  with  this  object  in  view. 

By  the  absolute  exclusion  of  specific  manufactures  of  foreign 
fabric,  a  government  establishes  a  monopoly  in  favour  of  the  home 
producers  of  these  articles,  and  in  prejudice  of  the  home  consumers ; 
that  is  to  say,  those  classes  of  the  nation  which  produce  them,  being 
entitled  to  their  exclusive  sale,  can  raise  their  prices  above  the  natu- 
ral rate;  while  the  home  consumers,  being  unable  to  purchase  else- 
where, are  compelled  to  pay  for  them  unnaturally  dear.*  If  the 

*  Ricardo,  in  his  Essay  on  the  Principles  of  Political  Economy  and  Taxation, 
published  in  1817,  has  justly  remarked  on  this  passage,  that  a  government  can 
not,  by  prohibition,  elevate  a  product  beyond  its  natural  rate  of  price :  for  in  that 
case,  the  home  producers  would  betake  themselves  in  greater  numbers  to  its  pro- 
duction, and,  by  competition,  reduce  the  profits  upon  it  to  the  general  level.  To 
make  myself  better  understood,  I  must  therefore  explain,  that,  by  natural  rate 
of  price,  I  mean  the  lowest  rate  at  which  a  commodity  is  procurable,  whether 
by  commerce  or  other  branch  of  industry.  If  commerical  can  procure  it  cheaper 
than  manufacturing  industry,  and  the  government  take  upon  itself  to  compel  its 
production  by  the  way  of  manufacture,  it  then  imposes  upon  the  nation  a  more 
chargeable  mode  of  procurement.  Thus,  it  wrongs  the  consumer,  without  giving 
to  the  domestic  producer  a  profit,  equivalent  to  the  extra  charge  upon  the  con- 
sumer ;  for  competition  soon  brings  that  profit  down  to  the  ordinary  level  of  profit, 
and  the  monopoly  is  thereby  rendered  nugatory.  So  that,  although  Ricardo  ig 
thus  far  correct  in  his  criticism,  he  only  shows  the  measure  I  am  reprobating  to 
be  more  mischievous ;  inasmuch  as  it  augments  the  natural  difficulties  in  the 
way  of  the  satisfaction  of  human  wants,  without  any  counteracting  benefit  to 
any  class  or  any  individual  whatever. 

because  he  believed,  and  most  justly,  that  these  measures  were  sound  in  prin- 
ciple, and  calculated  to  promote  the  real  and  lasting  interests  of  his  country." 

Since  that  time  all  the  successive  administrations  in  England,  both  Tory  and 
Whig,  have  at  least  uniformly  recognized  the  soundness  of  the  doctrines  of  jree 
trade,  and  some  of  them,  by  various  important  commercial  enactments,  have  given 
a  still  wider  application  to  these  beneficial  truths;  and  such,  too,  has  been  the 
effect  of  their  liberal  measures  upon  the  state  of  opinion  and  of  legislation 
throughout  Great  Britain,  that  both  in  and  out  of  parliament,  a  most  gratifying 
change  has  taken  place.  Commercial  questions  everywhere  now  occupy  a 
large  share  of  attention,  are  discussed  with  the  greatest  ability  and  acuteness  in 
almost  all  the  public  journals,  and  must  therefore  lead  to  the  emancipation  of 
commerce  from  the  fetters  which  have  so  long  and  so  perniciously  bound  it. 

In  France,  however,  and  other  countries  which  might  be  named,  the  state  of 
knowledge,  and  the  state  of  opinion,  are  not  yet  in  favour  of  liberal  commercial 
views.  "  For  thirty  years,"  we  are  told  by  the  English  Commissioners,  Messrs. 
Villiers  and  Bowring,  "nearly  every  law  passed  on  Custom  House  matters  had 
been  intended  either  to  establish  or  to  consolidate  the  system  of  protection  and 
prohibition.  Under  the  encouragement  of  the  legislature,  much  capital  has  been 
invested  in  the  establishment  and  extension  of  protected  manufactures,  whoso 
now  tottering  and  uncertain  position  (the  natural  and  necessary  consequence  of 
i he  system  itself)  has  made  their  proprietors  most  feelingly  alive  to  any  change 
might  affect  them." 

AMERICAN  EDITOH. 


CHAP.  XVIL  ON  PRODUCTION.  161 

articles  be  not  wholly  prohibited,  but  merely  saddled  with  an  import 
duty,  the  home  producer  can  then  increase  their  price  by  the  whole 
amount  of  the  duty,  and  the  consumer  will  have  to  pay  the  differ- 
ence.  For  example,  if  an  import  duty  of  20  cents  per  dozen  be  laid 
upon  earthenware  plates  worth  60  cents  per  dozen,  the  importer 
whatever  country  he  may  belong  to,  must  charge  the  consumer  30 
cents;  and  the  home  manufacturer  of  that  commodity  is  enabled  to 
ask  80  cents  per  dozen  of  his  customers  for  plates  of  the  same  qual- 
ity ;  which  he  could  not  do  without  the  intervention  of  the  duty  • 
because  the  consumer  could  get  the  same  article  for  60  cents:  thus, 
a  premium  to  the  whole  extent  of  the  duty  is  given  to  the  home 
manufacturer  out  of  the  consumer's  pocket 

Should  any  one  maintain,  that  the  advantage  of  producing  at  home 
counterbalances  the  hardship  of  paying  dearer  for  almost  every  arti- 
cle ;  that  our  own  capital  and  labour  are  engaged  in  the  production, 
and  the  profits  pocketed  by  our  own  fellow-citizens;  my  answer  is, 
that  the  foreign  commodities  we  might  import  are  not  to  be  had 
gratis :  that  we  must  purchase  them  with  values  of  home  production, 
which  would  have  given  equal  employment  to  our  industry  and 
capital ;  for  we  must  never  lose  sight  of  this  maxim,  that  products 
are  always  bought  ultimately  with  products.  It  is  most  for  our  ad- 
vantage to  employ  our  productive  powers,  not  in  those  branches  in 
which  foreigners  excel  us,  but  in  those  which  we  excel  in  ourselves  ; 
and  with  the  product  te  purchase  of  others.  The  opposite  course 
would  be  just  as  absurd,  as  if  a  man  should  wish  to  make  his  own 
coats  and  shoes.  What  would  the  world  say,  if,  at  the  door  of  every 
house  an  import  duty  were  laid  upon  coats  and  shoes,  for  the  lauda- 
ble purpose  of  compelling  the  inmates  to  make  them  for  themselves  1 
Would  not  people  say  with  justice,  Let  us  follow  each  his  own  pur- 
suits, and  buy  what  we  want  with  what  we  produce,  or,  which  comes 
to  the  same  thing,  with  what  we  get  for  our  products.  The  system 
would  be  precisely  the  same,  only  carried  to  a  ridiculous  extreme. 

Well  may  it  be  a  matter  of  wonder,  that  every  nation  should 
manifest  such  anxiety  to  obtain  prohibitory  regulations,  if  it  be  true 
that  it  can  profit  nothing  by  them ;  and  lead  one  to  suppose  the  two 
cases  not  parallel,  because  we  do  not  find  individual  householders 
solicitous  to  obtain  the  same  privilege.  But  the  sole  difference  is 
this,  that  individuals  are  independent  and  consistent  beings,  actuated 
by  no  contrariety  of  will,  and  more  interested  in  their  character  of 
consumers  of  coats  and  shoes  to  buy  them  cheap,  than  as  manufac- 
turers to  sell  unnaturally  dear. 

Who,  then,  are  the  classes  of  the  community  so  importunate  for 
prohibitions  or  heavy  import  duties?  The  producers  of  the  par- 
ticular commodity,  that  applies  for  protection  from  competition,  not 
the  consumers  of  that  commodity.  The  public  interest  is  their  plea , 
but  self-interest  is  evidently  their  object  Well,  but,  say  tnesc 
gentry,  are  they  not  the  same  thing  ?  are  not  our  gains  national  gains  s 
Bv  no  means:  whatever  profit  is  acquired  in  this  manner  «s  so 
'  14*  V 


162  ON  PRODUCTION.  BOOK  I 

much  taken  out  of  the  pockets  of  a  neighbour  and  fellow-citizen . 
and,  if  the  excess  of  charge  thrown  upon  consumers  by  the  mono- 
poly could  be  correctly  computed,  it  would  be  found,  that  the  loss  of 
the  consumer  exceeds  the  gain  of  the  monopolist.  Here,  then, 
individual  and  public  interest  are  in  direct  opposition  to  each  other; 
and,  since  public  interest  is  understood  by  the  enlightened  few  alone, 
is  it  at  all  surprising,  that  the  prohibitive  system  should  find  so 
many  partisans  and  so  few  opponents? 

There  is  in  general  far  too  little  attention  paid  to  the  serious  mis- 
chief of  raising  prices  upon  the  consumers.  The  evil  is  not  apparent 
to  cursory  observation,  because  it  operates  piecemeal,  and  is  felt  in  a 
very  slight  degree  on  every  purchase  or  act  of  consumption :  but  it 
is  really  most  serious,  on  account  of  its  constant  recurrence  and 
universal  pressure.  The  whole  fortune  of  every  consumer  is  affect- 
ed by  every  fluctuation  of  price  in  the  articles  of  his  consumption ; 
the  cheaper  they  are,  the  richer  he  is,  and  vice  versa.  If  a  single 
article  rise  in  price,  he  is  so  much  the  more  poor  in  respect  of  that 
article;  if  all  rise  together,  he  is  poorer  in  respect  to  the  whole. 
And,  since  the  whole  nation  is  comprehended  in  the  class  of  the 
consumers,  the  whole  nation  must  in  that  case  be  the  poorer.  Be- 
sides which,  it  is  crippled  in  the  extension  of  the  variety  of  its  en- 
joyments, and  prevented  from  obtaining  products  whereof  it  stands 
in  need,  in  exchange  for  those  wherewith  it  might  procure  them. 
It  is  of  no  use  to  assert,  that,  when  prices  are  raised,  what  one  gains 
another  loses.  For  the  position  is  not  true,  except  in  the  case  ol 
monopolies ;  nor  even  to  the  full  extent  with  regard  to  them ;  foi 
the  monopolist  never  profits  to  the  full  amount  of  the  loss  to  the 
consumers.  If  the  rise  be  occasioned  by  taxation  or  import-duty 
under  any  shape  whatever,  the  producer  gains  nothing  by  the  in 
crease  of  price,  but  just  the  reverse,  as  we  shall  see  by  and  by  (Book 
III.  Chapter  VII. :)  so  that,  in  fact,  he  is  no  richer  in  his  capacity  of 
producer,  though  poorer  in  his  quality  of  consumer.  This  is  one 
of  the  most  effective  causes  of  national  impoverishment,  or  at  least 
one  of  the  most  powerful  checks  to  the  progress  of  national  wealth. 

For  this  reason,  it  may  be  perceived,  that  it  is  an  absurd  distinction 
to  view  with  more  jealousy  the  import  of  foreign  objects  of  barren 
consumption,  than  that  of  raw  materials  for  home  manufacture. 
Whether  the  products  consumed  be  of  domestic  or  of  foreign 
growth,  a  portion  of  wealth  is  destroyed  in  the  act  of  consumption, 
and  a  proportionate  inroad  made  into  the  wealth  of  the  community. 
But  that  inroad  is  the  result  of  the  act  of  consumption,  not  of  the 
act  of  dealing  with  the  foreigner;  and  the  resulting  stimulus  to 
national  production,  is  the  same  in  either  case.  For,  wherewith 
was  the  purchase  of  the  foreign  product  made  ?  either  with  a  do- 
mestic product  or  with  money,  which  must  itself  have  been  pro- 
cured with  a  domestic  product.  In  buying  of  a  foreigner,  the  nation 
really  does  no  more  than  send  abroad  a  domestic  product  in  lieu  of 
ronsuming  it  at  home,  and  consume  in  its  place  the  foreign  product 
received  in  exchange.  The  individual  consumer  himself,  probably, 


CHAP.  XVIL  ON  PRODUCTION.  163 

does  not  conduct  this  operation;  commerce  conducts  it  for  him. 
No  one  country  can  buy  of  another,  except  with  its  own  domestic 
products. 

In  defence  of  import  duties  it  is  often  urged,  "that  when  the  inte- 
rest of  money  is  lower  abroad  than  at  home,  the  foreign  has  an  ad- 
vantage over  the  home  producer,  which  must  be  met  by  a  counter- 
vailing duty."  The  low  rate  of  interest  is,  to  the  foreign  producer, 
an  advantage,  analogous  to  that  of  the  superior  quality  of  his  land.  It 
tends  to  cheapen  the  products  he  raises ;  and  it  is  reasonable  enough 
that  our  domestic  consumers  should  take  the  -benefit  of  that  cheap- 
ness. The  same  motive  will  operate  here,  that  leads  us  rather  to 
import  sugar  and  indigo  from  tropical  climates,  than  to  raise  them 
in  our  own. 

"  But  capital  is  necessary  in  every  branch  of  production :  so  that 
the  foreigner,  who  can  procure  it  at  a  lower  rate  of  interest,  has 
the  same  advantage  in  respect  to  every  product ;  and,  if  the  free  im- 
portation be  permitted,  he  will  have  an  advantage  over  all  classes  of 
home  producers."  Tell  me,  then,  how  his  products  are  to  be  paid 
for.  "  Why,  in  specie,  and  there  lies  the  mischief."  And  how  is 
the  specie  to  be  got  to  pay  for  them  ?  "  All  the  nation  has,  will  go 
in  that  way ;  and  when  it  is  exhausted  national  misery  will  be  com- 
plete." So  then  it  is  admitted,  that  before  arriving" at  this  extremity, 
the  constant  efflux  of  specie  will  gradually  render  it  more  scarce  at 
home,  and  more  abundant  abroad ;  wherefore,  it  will  gradually  rise 
1,  2,  3,  per  cent  higher  in  value  at  home  than  abroad;  which  is  fully 
sufficient  to  turn  the  tide,  and  make  specie  flow  inwards  faster  than 
if  flowed  outwards.  But  it  will  not  do  so  without  some  returns ;  and 
of  what  can  the  returns  be  made,  but  of  products  of  the  land,  or  the 
commerce  of  the  nation  1  For  there  is  no  possible  means  of  pur- 
chasing from  foreign  nations,  otherwise  than  with  the  products  ol 
the  national  land  and  commerce ;  and  it  is  better  to  buy  of  them 
what  they  can  produce  cheaper  than  ourselves,  because  we  may  rest 
assured,  that  they  must  take  in  payment  what  we  can  produce 
cheaper  than  they.  This  they  must  do,  else  there  must  be  an  end  of 
all  interchange. 

Again,  it  is  affirmed,  and  what  absurd  positions  have  not  been 
advanced  to  involve  these  questions  in  obscurity  ?  that,  since  almost 
all  the  nation  are  at  the  same  time  consumers  and  producers,  they 
gain  by  prohibition  and  monopoly  as  much  in  the  one  capacity  as 
they  lose  in  the  other ;  that  the  producer,  who  gets  a  monopoly-pro- 
fit upon  the  object  of  his  own  production,  is,  on  the  other  hand,  the 
sufferer  by  a  similar  profit  upon  the  objects  of  his  consumption ;  and 
thus  that  the  nation  is  made  up  of  rogues  and  fools,  who  are  a  match 
for  each  other.  It  is  worth  remarking,  that  every  body  thinks  him- 
self more  rogue  than  fool ;  for,  although  all  are  consumers  as  well 
as  producers,  the  enormous  profits  made  upon  a  single  article  are 
much  more  striking,  than  reiterated  minute  losses  upon  the  number- 
less items  of  consumption.  If  an  import  duty  be  laid  upon  calicoes 
the  additional  annual  charge  to  each  person  of  moderate  fortune,  may, 


164  ON  PRODUCTION.  BOOK  L 

perhaps,  not  exceed  2^  dollars  or  3  dollars  at  most ;  and  probably  he 
does  not  very  well  comprehend  the  nature  of  the  loss,  or  feel  it 
much,  though  repeated  in  some  degree  or  other  upon  every  thing  he 
consumes;  whereas,  possibly,  this  consumer  is  himself  a  manufac- 
turer, say  a  hat-maker ;  and  should  a  duty  be  laid  upon  the  import 
of  foreign  hats,  he  will  immediately  see  that  it  will  raise  the  price 
of  his  own  hats,  and  probably  increase  his  annual  profits  by  several 
thousand  dollars.  It  is  this  delusion  that  makes  private  interest  so 
warm  an  advocate  for  prohibitory  measures,  even  where  the  whole 
community  loses  more  by  them  as  consumers,  than  it  gains  as 
producers. 

But,  even  in  this  point  of  view,  the  exclusive  system  is  pregnant 
with  injustice.  It  is  impossible  that  every  class  of  production  should 
profit  by  the  exclusive  system,  supposing  it  to  be  universal,  which, 
in  point  of  fact,  it  never  is  in  practice,  though  possibly  it  may  be  in 
law  or  intention.  Some  articles  can  never,  from  the  nature  of  things, 
be  derived  from  abroad;  fresh  fish,  for  instance,  or  horned  cattle; 
as  to  them,  therefore,  import  duties  would  be  inoperative  in  raising 
the  price.  The  same  may  be  said  of  masons  and  carpenters'  work, 
and  of  the  numberless  callings  necessarily  carried  on  within  the 
community;  as  those  of  shopmen,  clerks,  carriers,  retail  dealers, 
.and  many  others.  The  producers  of  immaterial  products,  public 
functionaries,  and  fundholders,  lie  under  the  same  disability.  These 
classes  can  none  of  them  be  invested  with  a  monopoly  by  means  of 
import  duties,  though  they  are  subjected  to  the  hardship  of  many 
monopolies  granted  in  that  way  to  other  classes  of  producers.* 

Besides,  the  profits  of  monopoly  are  not  equitably  divided  amongst 
the  different  classes  even  of  those  that  concur  in  the  production  of 
the  commodity,  which  is  the  subject  of  monopoly.  If  the  master- 
adventurers,  whether  in  agriculture,  manufacture,  or  commerce,  have 
the  consumers  at  their  mercy,  their  labourers  and  subordinate  pro- 
ductive agents  are  still  more  exposed  to  their  extortion,  for  reasons 
that  will  be  explained  in  Book  II.  So  that  these  latter  classes  par- 
ticipate in  the  loss  with  consumers  at  large,  but  get  no  share  of  the 
unnatural  gains  of  their  superiors. 

Prohibitory  measures,  besides  affecting  the  pockets  of  the  con- 
sumers, often  subject  them  to  severe  privations.  I  am  ashamed  to 

*  There  is  a  sort  of  malicious  satisfaction  in  the  discovery,  that  those  who 
impose  these  restrictions  are  usually  among  the  severest  sufferers.  Sometimes 
they  attempt  to  indemnify  themselves  by  a  further  act  of  injustice;  the  public 
functionaries  augment  their  own  salaries,  if  they  have  the  keeping  of  the  public 
purse.  At  other  times  they  abolish  a  monopoly,  when  they  find  it  press  pecu- 
liarly on  themselves.  In  1599,  the  manufacturers  of  Tours  petitioned  Henry  IV. 
to  prohibit  the  import  of  gold  and  silver  silk  stuffs,  which  had  previously  been 
entirely  of  foreign  fabric.  They  cajoled  the  government  by  the  statement,  that 
they  could  furnish  the  whole  consumption  of  France  with  that  article.  The  king 
granted  their  request,  with  his  characteristic  facility ;  b  it  the  consumers,  who 
wore  chiefly  the  courtiers  and  people  of  condition,  were  loud  in  their  remon- 
strances at  the  consequent  advance  of  price ;  and  the  edict  was  revoked  in  six 
months.  Memoires  de  Sully,  liv.  ii. 


CHAP.  XVII.  ON  PRODUCTION. 


165 


say,  that,  within  these  few  years,  we  have  had  the  hat-makers  of 
Marseilles  petitioning  for  the  prohibition  of  the  import  of  foreign 
straw  or  chip  hats,  on  the  plea  that  they  injured  the  sale  of  their  own 
felt  hats;*  a  measure  that  would  have  deprived  the  country  people 
and  labourers  in  husbandry,  who  are  so  much  exposed  to  the  sun,  of  a 
light,  a  cool,  and  cheap  covering,  admirably  adapted  to  their  wants, 
the  use  of  which  it  was  highly  desirable  to  extend  and  encourage. 

In  pursuit  of  what  it  mistakes  for  profound  policy,  or  to  gratify 
feelings  it  supposes  to  be  laudable,  a  government  will  sometimes 
prohibit  or  divert  the  course  of  a  particular  trade,  and  thereby  do 
irreparable  mischief  to  the  productive  powers  of  the  nation.  When 
Philip  II.  became  master  of  Portugal,  and  forbade  all  intercourse 
between  his  new  subjects  and  the  Dutch,  whom  he  detested,  what 
was  the  consequence  I  The  Dutch,  who  before  resorted  to  Lisbon 
for  the  manufactures  of  India,  of  which  they  took  off  an  immense 
quantity,  finding  this  avenue  closed  against  their  industry,  went 
straight  to  India  for  what  they  wanted,  and,  in  the  end,  drove  out 
the  Portuguese  from  that  quarter;  and,  what  was  meant  as  the 
deadly  blow  of  inveterate  hatred,  turned,  out  the  main  source  of 
their  aggrandizement.  "Commerce,"  says  Fenelon,  "is  like  the 
native  springs  of  the  rock,  which  often  cease  to  flow  altogether,  if 
it  be  attempted  to  alter  their  course."f 

Such  are  the  principal  evils  of  impediments  thrown  in  the  way  of 
import,  which  are  carried  to  the  extreme  point  by  absolute  prohibi- 
tion. There  have,  indeed,  been  instances  of  nations  that  have  thriven 
under  such  a  system ;  but  then  it  was,  because  the  causes  of  national 
prosperity  were  more  powerful  than  the  causes  of  national  impover- 
ishment. Nations  resemble  the  human  frame,  which  contains  a  vital 
principle,  that  incessantly  labours  to  repair  the  inroads  of  excess  and 
dissipation  upon  its  health  and  constitution.  Nature  is  active  in 
closing  the  wounds  and  healing  the  bruises  inflicted  by  our  own 
awkwardness  and  intemperance.  In  like  manner,  states  maintain 
themselves,  nay,  often  increase  in  prosperity,  in  spite  of  the  infinite 
injuries  of  every  description,  which  friends  as  well  as  enemies  inflict 
upon  them.  And  it  is  worth  remarking,  that  the  most  industrious 
nations  are  those,  which  are  the  most  subjected  to  such  outrage, 
because  none  others  could  survive  them.  The  cry  is  then  "  our  sys- 
tem must  be  the  true  one,  for  the  national  prosperity  is  advancing.'' 
Whereas,  were  we  to  take  an  enlarged  view  of  the  circumstances, 
that,  for  the  last  three  centuries,  have  combined  to  develope  the 
power  and  faculties  of  man;'  to  survey  with  the  eye  of  intelligence 

*  Bulletin  de  la  Societe  <T Encouragement  pour  V Industrie  Nationale,  No.  4. 

f  The  national  convention  of  France  prohibited  the  import  of  raw  hides  from 
Spain,  on  the  plea  that  they  injured  the  trade  in  those  of  France ;  not  observing, 
that  the  self-same  hides  went  back  to  Spain  in  a  tanned  state.  The  tanneries  of 
France  being  obliged  to  procure  the  raw  article  at  too  dear  a  rate,  were  quickly 
abandoned ;  and  the  manufacture  was  transferred  to  Spain,  along  with  great  part 
of  the  capital,  and  many  of  the  hands  employed.  It  is  next  to  impossible  for  a. 
government,  not  only  to, do  any  good  to  national  production  by  its  interference, 
but  even  to  avoid  doing  mischief. 


106  ON  PRODUCTION.  BOOK  I. 

the  progress  of  navigation  and  discovery,  of  invention  in  every 
branch  of  art  and  science ;  to  take  account  of  the  variety  of  useful 
animals  and  vegetables  that  have  been  transplanted  from  one  hemi- 
sphere to  the  other,  and  to  give  a  due  attention  to  the  vast  augment- 
ation and  increased  scope  both  of  science  and  of  its  practical  appli- 
cations, that  we  are  daily  witnesses  of,  we  could  not  resist  the 
conviction,  that  our  actual  prosperity  is  nothing  to  what  it  might 
have  been ;  that  it  is  engaged  in  a  perpetual  struggle  against  the 
obstacles  and  impediments  thrown  into  its  way ;  and  that,  even  in 
those  parts  of  the  world  where  mankind  is  deemed  the  most  enlight- 
ened, a  great  part  of  their  time  and  exertions  are  occupied  in 
destroying  instead  of  multiplying  their  resources,  in  despoiling 
instead  of  assisting  each  other;  and  all  for  want  of  correct  know- 
ledge and  information  respecting  their  real  interests.* 

.  But,  to  return  to  the  subject,  we  have  just  been  examining,  the 
nature  of  the  injury  that  a  community  suffers  by  difficulties  thrown 
in  the  way  of  the  introduction  of  foreign  commodities.  The  mischief 
occasioned  to  the  country  that  produces  the  prohibited  article,  is 
of  the  same  kind  and  description ;  it  is  prevented  from  turning  its 
capital  and  industry  to  the  best  account.  But  it  is  not  to  be  supposed 
that  the  foreign  nation  can  by  this  means  be  utterly  ruined  and 
stripped  of  all  resource,  as  Napoleon  seemed  to  imagine,  when  he 
excluded  the  products  of  Britain  from  the  markets  of  the  continent. 
To  say  nothing  of  the  impossibility  of  effecting  a  complete  and  actual 
blockade  of  a  whole  country,  opposed  as  it  must  be  by  the  universal 
motive  of  self-interest,  the  utmost  effect  of  it  can  only  be  to  drive 
its  production  into  a  different  channel.  A  nation  is  always  competent 
to  the  purchase  and  consumption  of  the  whole  of  its  own  products, 
for  products  are  always  bought  with  other  products.  Do  you  think 
it  possible  to  prevent  England  from  producing  value  to  the  amount 
of  a  million,  by  preventing  her  export  of  woollens  to  that  amount  1 
You  are  much  mistaken  if  you  do.  England  will  employ  the  same 
capital  and  the  same  manual  labour  in  the  preparation  of  ardent 
spirits,  by  the  distillation  of  grain  or  other  domestic  products,  that 
were  before  occupied  in  the  manufacture  of  woollens  for  the  French 
market,  and  she  will  then  no  longer  bring  her  woollens  to  be  barter- 
ed for  French  brandies.  A  country,  in  one  way  or  other,  direct  or 
indirect,  always  consumes  the  values  it  produces,  and  can  consume 
nothing  more.  If  it  cannot  exchange  its  products  with  its  neighbours, 
it  is  compelled  to  produce  values  of  such  kinds  only  as  it  can  con- 
sume at  home.  This  is  the  utmost  effect  of  prohibitions ;  both  parties 
are  worse  provided,  and  neither  is  at  all  the  richer. 

*  It  is  not  my  design  to  insinuate  by  this,  that  it  is  desirable  that  all  minds 
should  be  imbued  with  all  kinds  of  knowledge ;  but  that  every  one  should  have 
just  and  correct  notions  of  that,  in  which  he  is  more  immediately  concerned. 
Nor  is  the  general  and  complete  diffusion  of  information  requisite  for  the  bene- 
fic.ial  ends  of  science.  The  good  resulting  from  it  is  proportionate  to  the  extent 
of  its  progress:  and  the  welfare  of  nations  differs  in  degree,  according  to  the 
correctness  of  their  ideas  upon  those  points,  which  most  intimately  concern  them 
•'jspectively. 


CHAP.  XVH.  ON  PRODUCTION.  ]fi7 

Napoleon,  doubtless,  occasioned  much  injury,  both  to  England 
and  to  the  continent,  by  cramping  their  mutual  relations  of  com- 
merce as  far  as  he  possibly  could.  But,  on  the  other  hand,  he  did 
the  continent  of  Europe  the  involuntary  service  of  facilitating  the 
communication  between  .its  different  parts,  by  the  universality  of 
dominion,  which  his  ambition  had  well-nigh  achieved.  The  frontier 
duties  between  Holland,  Belgium,  part  of  Germany,  Italy,  and 
France,  were  demolished ;  and  those  of  the  other  powers,  with  the 
exception  of  England,  were  far  from  oppressive.  We  may  form 
some  estimate  of  the  benefit  thence  resulting  to  commerce,  from  the 
discontent  and  stagnation  that  have  ensued  upon  the  establishment 
of  the  present  system  of  lining  the  frontier  of  each  state  with  a 
triple  guard  of  douaniers.  All  the  continental  states  so  guarded 
have,  indeed,  preserved  their  former  means  of  production;  but  that 
production  has  been  made  less  advantageous. 

It  cannot  be  denied,  that  France  has  gained  prodigiously  by  the 
suppression  of  the  provincial  barriers  and  custom-houses,  consequent 
upon  her  political  revolution.  Europe  had,  in  like  manner,  gained 
by  the  partial  removal  of  the  international  barriers  between  its  dif- 
ferent political  states ;  and  the  world  at  large  would  derive  similar 
benefit  from  the  demolition  of  those,  which  insulate,  as  it  were,  the 
various  communities,  into  which  the  human  race  is  divided. 

I  have  omitted  to  mention  other  very  serious  evils  of  the  exclusive 
system ;  as,  for  instance,  the  creation  of  a  new  class  of  crime,  that 
of  smuggling ;  whereby  an  action,  wholly  innocent  in  itself,  is  made 
legally  criminal :  and  persons,  who  are  actually  labouring  for  the 
general  welfare,  are  subjected  to  punishment. 

Smith  admits  of  two  circumstances,  that,  in  his  opinion,  will  justify 
a  government  in  resorting  to  import-duties: — 1.  When  a  particular 
branch  of  industry  is  necessary  to  the  public  security,  and  the  ex- 
ternal supply  cannot  be  safely  reckoned  upon.  On  this  account  a 
government  may  very  wisely  prohibit  the  import  of  gun-powder,  if 
such  prohibition  be  necessary  to  set  the  powder-mills  at  home  in 
activity ;  for  it  is  better  to  pay  somewhat  dear  for  so  essential  an 
article,  than  to  run  the  risk  of  being  unprovided  in  the  hour  of  need.* 
2.  Where  a  similar  commodity  of  home  produce  is  already  saddled 
with  a  duty.  The  foreign  article,  if  wholly  exempt  from  duty, 
would  in  this  case  have  an  actual  privilege;  so  that  a  duty  imposed 
has  not  the  effect  of  destroying,  but  of  restoring  the  natural  equi- 
librium and  relative  position  of  the  different  branches  of  production. 

Indeed,  it  is  impossible  to  find  any  reasonable  ground  for  exempt- 
ing the  production  of  values  by  the  channel  of  external  commerce 
from  the  same  pressure  of  taxation  that  weighs  upon  the  production 
effected  in  those  of  agriculture  and  manufacture.  Taxation  is,  doubt 

*  There  is  no  great  weight  in  this  plea  of  justification.  For  experience  has 
shown,  that  saltpetre  is  stored  against  the  moment  of  need,  in  the  largest  quan- 
tity, when  it  is  most  an  article  of  habitual  import.  Yet  the  legislature  of  Franc* 
has  saddled  it  with  duties  amounting  to  prohibition. 


168  ON  PRODUCTION.  BOOK  L 

less,  an  evil,  and  one  which  should  be  reduced  to  the  lowest  possib.e 
degree;  but  when  once  a  given  amount  of  taxation  is  admitted  to  be 
necessary,  it  is  but  common  justice  to  lay  it  equally  on  all  three 
branches  of  industry.  The  error  I  wish  to  expose  to  reprobation  is 
the  notion  that  taxes  of  this  kind  are  favourable  to  production.  A 
tax  can  never  be  favourable  to  the  public  welfare,  except  by  the 
good  use  that  is  made  of  its  proceeds. 

These  points  should  never  be  lost  sight  of  in  the  framing  of  com- 
mercial treaties,  which  are  really  good  for  nothing  but  to  protect 
industry  and  capital,  diverted  into  improper  channels  by  the  blunders 
of  legislation.  These  it  would  be  far  wiser  to  remedy  than  to  per- 
petuate. The  healthy  state  of  industry  and  wealth  is  the  state  of 
absolute  liberty,  in  which  each  interest  is  left  to  take  care  of  itself. 
The  only  useful  protection  authority  can  afford  them  is  that  against 
fraud  or  violence.  Taxes  and  restrictive  measures  never  can  be  a 
benefit :  they  are  at  the  best  a  necessary  evil ;  to  suppose  them  useful 
to  the  subjects  at  large,  is  to  mistake  the  foundation  of  national  pros- 
perity, and  to  set  at  naught  the  principles  of  political  economy. 

Import  duties  and  prohibitions  have  often  been  resorted  to^as  a 
means  of  retaliation :  '  Your  government  throws  impediments  in  the 
way  of  the  introduction  of  our  national  products :  are  not  we,  then, 
justified  in  equally  impeding  the  introduction  of  yours  1"  This  is 
the  favourite  plea,  and  the  basis  of  most  commercial  treaties ;  but 
people  mistake  their  object :  granting  that  nations  have  a  right  to  do 
one  another  as  much  mischief  as  possible,  which,  by  the  way,  I  can 
hardly  admit;  I  am  not  here  disputing  their  rights,  but  discussing 
their  interests. 

Undoubtedly,  a  nation  that  excludes  you  from  all  commercial 
intercourse  with  her,  does  you  an  injury ; — robs  you,  as  far  as  in  her 
lies,  of  the  benefits  of  external  commerce ;  if,  therefore,  by  the  dread 
of  retaliation,  you  can  induce  her  to  abandon  her  exclusive  measures, 
there  is  no  question  about  the  expediency  of  such  retaliation,  as  a 
matter  of  mere  policy.  But  it  must  not  be  forgotten  that  retaliation 
hurts  yourself  as  well  as  your  rival ;  that  it  operates,  not  defensively 
against  her  selfish  measures,  but  offensively  against  yourself,  in  the 
first  instance,  for  the  purpose  of  indirectly  attacking  her.  The  only 
point  in  question  is  this,  what  degree  of  vengeance  you  are  animated 
by,  and  how  much  will  you  consent  to  throw  away  upon  its  gratifi- 
cation.* I  will  not  undertake  to  enumerate  all  the  evils  arising  from 
treaties  of  commerce,  or  to  apply  the  principles  enforced  throughout 

*  The  transatlantic  colonies,  that  have  within  these  few  years  thrown  off  their 
colonial  dependence,  amongst  others,  the  provinces  of  La  Plata,  and  St.  Domingo 
or  Haiti,  have  opened  their  ports  to  foreigners,  without  any  demand  of  reciprocity, 
and  are  more  rich  and  prosperous  than  they  ever  were  under  the  operation  of  the 
exclusive  system.  We  are  told  that  the  trade  and  prosperity  of  Cuba  have 
doubled  since  its  ports  have  been  opened  to  the  flags  of  all  nations,  by  a  concur- 
rence of  imperious  circumstances,  and  in  violation  of  the  system  of  the  mother- 
country.  The  elder  states  of  Europe  go  on  Irfce  wrong-headed  farmers,  in  a 
bigoted  attachment  to  their  old  prejudices  and  methods,  while  they  have  exam 
p'«s  of  the  good  effects  of  an  improved  system  all  around  them. 


XVII.  ON  PRODUCTION.  I69 

this  work  to  all  the  clauses  and  provisions  usually  contained  in  them. 
I  will  confine  myself  to  the  remark,  that  almost  every  modern  treaty 
of  commerce  has  had  for  its  basis  the  imaginary 'advantage  and 
possibility  of  the  liquidation  of  a  favourable  balance  of  trade  by  an 
import  of  specie.  If  these  turn  out  to  be  chimerical,  whatever 
advantage  may  have  resulted  from  such  treaties  must  be  wholly 
referred  to  the  additional  freedom  and  facility  of  international  com- 
munication obtained  by  them,  and  not  at  all  to  their  restrictive 
clauses  or  provisoes,  unless  either  of  the  contracting  parties  has 
availed  itself  of  its  superior  power,  to  exact  conditions  savouring  of 
a  tributary  character ;  as  England  has  done  in  relation  to  Portugal. 
In  such  case,  it  is  mere  exaction  and  spoliation.(l) 

(1)  Mr.  Villiers  and  Dr.  Bowring,  in  their  very  valuable  report  on  the  com 
mercial  relations  between  France  and  Great  Britain,  presented  to  both  Houses 
of  Parliament,  during  the  present  year,  (1834,)  in  remarking  upon  the  disappoint- 
ments which  had  been  experienced  from  treaties  of  commerce  between  France 
and  Great  Britain,  point  out  the  true  causes  of  the  failure  of  these  arrangements, 
however  usefully  they  were  intended  ;  and  as  it  is  of  importance  in  other  coun- 
tries to  guard  against  a  recurrence  to  similar  experiments  which  might  present 
a  formidable  barrier  against  any  permanent  or  solid  change  to  a  more  liberal  in- 
ternational intercourse,  we  cannot  do  better,  in  this  place,  than  to  copy  their  ex- 
cellent observations  on  this  head. 

"  These  arrangements,  however  usefully  intended,  were  productive  of  so  much 
inconvenience  and  suffering  from  the  sudden  shifting  of  capital,  as  to  induce  an 
unwillingness  to  await  patiently  for  their  ultimate  but  somewhat  remote  advan- 
tages. Every  treaty  of  commercial  change  must,  it  is  certain,  affect  some  interest 
or  other,  and  by  these  treaties,  particularly  the  treaty  of  1786,  so  many  interests 
were  suddenly  and  severely  affected,  that  they  were  enabled,  by  combining 
together,  to  overthrow  all  the  expectations  of  future  good  which  would  have  in- 
evitably followed  the  removal  of  restrictions  and  prohibitions." 

"  It  may  also  be  observed,  that  treaties  of  commerce  are  generally  agreements 
for  mutual  preferences ;  and  in  so  far,  are  encroachments  upon  sound  commercial 
principles.  They  are  intended  to  benefit  the  contracting  parties  by  common 
intercourse,  to  the  exclusion  (and  consequently  to  the  detriment)  of  other  nations. 
They  ordinarily  propose  exclusive  advantages,  which,  if  they  open  some  chan- 
nels of  commercial  profit,  necessarily  close  others,  and  prevent  the  negotiating 
nations  from  availing  themselves  of  the  improvements  or  accommodating  them- 
selves to  the  changes  which  the  .fluctuations  of  agriculture,  manufactures,  or 
trade  demand.  The  Methuen  treaty,  for  example,  bound  Great  Britain  to  take 
the  produce  of  a  particular  country  at  diminished  duties,  whatever  superior  ad- 
vantages any  other  country  might  chance  to  offer;  while  Portugal  was,  at  the 
same  time,  compelled  to  receive  the  manufactures  of  England,  whether  or  not  she 
might  have  supplied  herself  more  profitably  elsewhere.  A  treaty,  therefore,  with 
France,  proffering  reciprocal  advantages,  that  is  to  say,  giving  to  France  peculiar 
privileges  in  the  English  market,  or  obtaining  peculiar  privileges  for  England  in 
the  markets  of  France,  did  not  appear  to  offer  any  prospect  of  permanent  utility; 
but,  if  it  were  possible  that  each  country  should,  for  itself,  and,  with  a  special 
view  to  its  own  interests,  remove  those  impediments  to  intercourse  which  had 
grown  out  of  hostile  feelings  or  erroneous  calculations,  and  by  comparing  the  facts 
which  each  government  was  enabled  to  furnish  for  the  elucidation  of  the  inquiry, 
each  should  find  that  it  could  safely  and  judiciously  prepare  for  more  extended 
transactions;  if,  in  a  word,  it  could  be  shown  that  each  possessed  sources  of  wealth 
^ich  might  be  made  productive  to  the  other,  while  they  lost  nothing  of  their 
productiveness  to  the  nation  that  possessed  them,  we  believed  that,  in  selecting 
such  topics  for  our  examination,  and  such  objects  for  their  result,  we  were  bes* 
discharging  the  duty  which  had  devolved  on  us."  AMERICAN  EDITOR. 

15  W 


170  ON  PRODUCTION.  BOOK  I 

Again,  I  would  observe,  that  the  offer  of  peculiar  ad\  antages  by 
one  nation  to  another,  in  the  way  of  a  treaty  of  commerce,  if  not  an 
act  of  hostility,  is  at  least  one  of  extreme  odium  in  the  eyes  of  other 
nations.  For  the  concession  to  one  can  only  be  rendered  effectual 
by  refusal  to  others.  Hence  the  germ  of  discord  and  of  war,  with 
all  its  mischiefs.  It  is  infinitely  more  simple,  and  I  hope  to  have 
shown,  more  profitable  also,  to  treat  all  nations  as  friends,  and 
impose  no  higher  duties  on  the  introduction  of  their  products,  than 
what  are  necessary  to  place  them  on  the  same  footing  as  those  of 
domestic  growth. 

Yet,  notwithstanding  all  the  mischiefs  resulting  from  the  exclusion 
of  foreign  products,  which  I  have  been  depicting,  it  would  be  an  act 
of  unquestionable  rashness  suddenly  to  change  even  so  ruinous  a 
policy.  Disease  is  not  to  be  eradicated  in  a  moment;  it  requires 
nursing  and  management  to  dispense  even  national  benefits.  Mono- 
polies are  an  abuse,  but  an  abuse  in  which  enormous  capital  is  vested, 
and  numberless  industrious  agents  employed,  which  deserve  to  be 
treated  with  consideration ;  for  this  mass  of  capital  and  industry 
cannot  all  at  once  find  a  more  advantageous  channel  of  national 
production.  Perhaps  the  cure  of  all  the  partial  distresses  that  must 
follow  the  downfall  of  that  colossal  monster  in  politics,  the  exclusive 
system,  would  be  as  much  as  the  talent  of  any  single  statesman  could 
accomplish ;  yet  when  one  considers  calmly  the  wrongs  it  entails 
when  it  is  established,  and  the  distresses  consequent  upon  its  over- 
throw, we  are  insensibly  led  to  the  reflection,  that,  if  it  be  so  difficult 
to  set  shackled  industry  at  liberty  again,  with  what  caution  ought 
we  not  to  receive  any  proposition  for  enslaving  her ! 

But  governments  have  not  been  content  with  checking  the  import 
of  foreign  products.  In  the  firm  conviction,  that  national  prosperity 
consists  in  selling  without  buying,  and  blind  to  the  utter  impossibility 
of  the  thing,  they  have  gone  beyond  the  mere  imposition  of  a  tax 
or  fine  upon  purchasing  of  foreigners,  and  have  in  many  instances 
offered  rewards  in  the  shape  of  bounties  for  selling  to  them. 

This  expedient  has  been  employed  to  an  extraordinary  degree  by 
the  British  government,  which  until  recently  always  evinced  the 
greatest  anxiety  to  enlarge  the  market  for  British  commercial  and 
manufactured  produce.*  It  is  obvious,  that  a  merchant,  who  re- 

*  The  political  circumstances  of  England,  during  the  late  war,  and  her  prac- 
tice of  supporting  and  subsidizing  military  operations  on  the  continent,  furnished 
her  with  a  more  plausible  excuse  for  attempting  to  export,  in  the  shape  of  manu- 
factured produce,  those  values,  which  she  thus  expended  without  return.  But 
she  had  no  need  to  be  at  any  expense  for  that  purpose.  Had  England  charged 
a  seignorage  upon  the  coinage  of  gold  and  silver,  as  she  ought  to  have  done,  she 
needed  not  to  have  given  herself  any  trouble  about  the  form  of  the  values  she 
exported  to  meet  her  foreign  subsidies  and  expenditure :  guineas  would  them- 
selves have  been  an  object  of  manufacture.(o) 

(«)  So  they  were  without  the  imposition  of  a  seignorage,  which,  however, 
should  have  been  charged.  But  England  had  no  occasion  to  give  bounties  with 
I  view  to  facilitate  her  foreign  expenditure.  The  discount  of  her  bills  was  a 


CHAP.  XVII.  ON  PRODUCTION.  /  171 

ceives  a  bounty  upon  export,  can,  without  personal  loss,  afford  to  se.l 
his  goods  in  a  foreign  market  at  a  lower  rate  than  prime  cost.  In 
the  pithy  language  of  Smith,  "  We  cannot  force  foreigners  to  buy 
the  goods  of  our  own  workmen,  as  we  may  our  own  countrymen ; 
the  next  best  expedient,  it  has  been  thought,  therefore,  is  to  pay  them 
for  buying." 

In  fact,  if  a  particular  commodity,  by  the  time  it  has  reached  the 
French  market,  costs  the  English  exporter  20  dollars,  his  trouble, 
&c.  included,  and  the  same  commodity  could  be  bought  in  France 
at  the  same  or  a  less  rate,  there  is  nothing  to  give  him  exclusive 
possession  of  the  market.  But  if  the  British  government  pays  a 
bounty  of  2  dollars  upon  the  export,  and  thereby  enables  him  to 
lower  his  demand  from  20  to  18  dollars,  he  may  safely  reckon  upon 
a  preference.  Yet  what  is  this  but  a  free  gift  of  two  dollars  from 
the  British  government  to  the  French  consumer?  It  may  be  con- 
ceived, that  the  merchant  has  no  objection  to  this  mode  of  dealing ; 
for  his  profits  are  the  same  as  if  the  French  consumer  paid  the  full 
value,  or  cost  price,  of  the  commodity.  The  British  nation  is  the 
loser  in  this  transaction,  in  the  ratio  of  10  per  cent,  upon  the  French 
consumption;  and  France  remits  in  return  a  value  of  but  18  for 
what  has  cost  20  dollars. 

When  a  bounty  is  paid,  not  at  the  moment  of  export,  but  at  the 
commencement  of  productive  creation,  the  home  consumer  partici- 
pates with  the  foreigner  in  the  advantage  of  the  bounty ;  for,  in  that 
case,  the  article  can  be  sold  below  cost  price  in  the  home  as  well  as 
in  the  foreign  market.  And  if,  as  is  sometimes  the  case,  the  producer 
pockets  the  bounty,  and  yet  keeps  up  the  price  of  the  commodity, 
the  bounty  is  then  a  present  of  the  government  to  the  producer,  over 
and  above  the  ordinary  profits  of  his  industry. 

When,  by  the  means  of  a  bounty,  a  product  is  raised  either  for 
home  or  foreign  consumption,  which  would  not  have  been  raised 
without  one,  the  effect  is,  an  injurious  production,  one  that  costs 
more  than  it  is  worth.  Suppose  an  article,  when  completely  finished 
off,  to  be  saleable  for  5  dollars  and  no  more,  but  its  prime  cost,  in- 
cluding of  course  the  profits  of  productive  industry,  to  amount  to  6 
dollars,  it  is  quite  clear  that  nobody  will  volunteer  the  production, 
for  fear  of  a  loss  of  1  dollar.  But,  if  the  government,  with  a  view 
to  encourage  this  branch  of  industry,  be  willing  to  defray  this  loss — 
in  other  words,  if  it  offer  a  bounty  of  1  dollar  to  the  producer,  the 
production  can  then  go  on,  and  the  public  revenue,  that  is  to  say,  the 
nation  at  large,  will  be  a  loser  of  1  dollar.  And  this  is  precisely 
the  kind  of  advantage  that  a  nation  gains  by  encouraging  a  branch 

sufficient  premium  to  the  manufacturer;  and,  where  that  expenditure  was  laige, 
greatly  exceeded  either  drawbacks  or  bounties.  Had  specie  been  directly  pro- 
curable, perhaps  it  might  have  saved  something  to  the  government,  in  the  re- 
duced profit  payable  to  the  merchants  upon  a  mere  complex  operation.  But  the 
merchants  must  have  made  their  profit  upon  bullion.  The  sole  difference  occa- 
sioned by  the  absurdity  of  gratuitous  coinage  was,  the  expense  incurred  in  that 
coinage;  but  the  imposition  of  a  seignorage  would  neither  have  promoted  the 
import  of  bullion,  nor  facilitated  its  transport  to  the  scene  of  expenditure.  n\ 


172  ON  PRODUCTION.  BOOK  1 

of  production  which  cannot  support  itself:  it  is  in  fact  urging  the 
prosecution  of  a  losing  concern,  the  produce  of  which  is  exchanged, 
not  for  other  produce,  but  for  the  bounty  given  by  the  state. 

Wherever  there  is  any  thing  to  be  made  by  a  particular  employ- 
ment of  industry,  it  wants  no  encouragement;  where  there  is  nothing 
to  be  made,  it  deserves  none.  There  is  no  truth  in  the  argument, 
that  perhaps  the  state  may  gain,  though  individuals  cannot;  for  how 
can  the  state  gain,  except  through  the  medium  of  individuals  ?  Per- 
haps it  may  be  said,  that  the  state  receives  more  in  duties  than  it 
pays  in  bounties ;  but  suppose  it  does,  it  merely  receives  with  one 
hand  and  pays  with  the  other:  let  the  duties  be  lowered  to  the  whole 
amount  of  the  bounty,  and  production  will  stand  precisely  where  it 
did  before,  with  this  difference  in  its  favour,  viz.  that  the  state  will 
save  the  whole  charge  of  management  of  the  bounties,  and  part  of 
fhat  of  the  duties. 

Though  bounties  a/e  chargeable,  and  a  dead  loss  to  the  gross 
national  wealth,  there  are  cases  in  which  it  is  politic  to  incur  that 
Ioss;(l)  as  when  a  particular  product  is  necessary  to  public  security, 
and  must  be  had  at  any  rate,  however  extravagant.  Louis  XIV., 
with  a  view  to  restore  the  marine  of  France,  granted  a  bounty  of  1 
dollar  per  ton  upon  every  ship  fitted  out  in  France.  His  object  was 
to  train  up  sailors.  So  likewise  when  the  bounty  is  the  mere  refund- 
ing of  a  duty  previously  exacted.  The  bounty  paid  by  Great  Britain 
upon  the  export  of  refined  sugar  is  nothing  more  than  the  reimburse- 
ment of  the  import  duties  upon  muscovado  and  molasses. 

Perhaps,  too,  it  may  be  wise  in  a  government  to  grant  a  premium 
on  a  particular  product,  which,  though  it  make  a  loss  in  the  outset, 
holds  out  a  fair  prospect  of  profit  in  a  few  years'  time.  Smith 
thinks  otherwise :  hear  what  he  says  on  the  subject.  "  No  regula- 
tion of  commerce  can  increase  the  quantity  of  industry  in  any 
society,  beyond  what  its  capital  can  maintain.  &  can  only  divert  a 
part  of  it  into  a  direction,  into  \vhich  it  might  not  otherwise  have 
gone ;  and  it  is  by  no  means  certain,  that  this  artificial  direction  is 
likely  to  be  more  advantageous  to  the  society,  than  that  into  which 
it  would  have  gone  of  its  own  accord.  The  statesman,  who  should 
attempt  to  direct  private  people  in  what  manner  they  ought  to  em- 
ploy their  capitals,  would  not  only  load  himself  with  a  most  unne- 
cessary attention,  but  assume  an  authority,  which  could  safely  be 

(1)  We  already  have  had  occasion  to  remark  (note  1,  page  104)  that  there  can 
be  few  or  no  cases  in  which  it  would  ever  be  politic  to  incur  a  loss  by  the  pay- 
ment of  bounties,  even  with  the  expectation  of  insuring  the  production  of  objects 
necessary  to  the  public  safety.  For  the  end  aimed  at  never  can  be  attained  by 
such  means.  The  naval  preponderance  of  England,  as  we  before  observed,  was 
not  owing  to  any  act  of  parliament,  but  can  satisfactorily  be  traced  to  those 
causes  we  have  mentioned  in  the  note  referred  to.  Holland,  besides,  rose  to  the 
highest  point  of  European  maritime  power,  without  any  navigation  laws,  or 
bounties  to  her  shipping;  and  Prance,  it  must  be  remembered,  notwithstanding 
the  famous  Ordonnance  in  1664,  of  Louis  XIV.,  "  to  engage  builders  and  mer- 
chants to  construct  French  vessels,"  never  obtained  the  so  much  desired  superi- 
ority in  ships  and  in  seamen.  AMERICAN  EDITOR. 


CHAP.  XVH.  ON  PRODUCTION.  173 

trusted,  not  only  to  no  single  person,  but  to  no  council  or  senate 
whatever ;  and  which  would  nowhere  be  so  dangerous,  as  in  the 
hands  of  a  man  who  had  folly  and  presumption  enough  to  fancy 
himself  fit  to  exercise  it.  Though  for  want  of  such  regulations,  the 
society  should  never  acquire  the  proposed  manufacture,  it  would  not 
upon  that  account  necessarily  be  the  poorer  in  any  one  period  of  its 
duration.  In  every  period  of  its  duration,  its  whole  capital  and  in- 
dustry might  still  have  been  employed,  though  upon  different  ob- 
ject  v  in  the  manner  that  was  most  advantageous  at  the  time."* 

AI.U  Smith  is  certainly  right  in  the  main;  though  perhaps  there 
are  circumstances  that  may  form  exceptions  to  the  general  rule,  that 
every  one  is  the  best  judge  how  to  employ  his  industry  and  capital. 
Smith  wrote  at  a  period  and  in  a  country,  where  personal  interest  is 
well  understood,  and  where  any  profitable  mode  of  investing  capital 
and  industry  is  not  likely  to  be  long  overlooked.  But  every  nation 
is  not  so  far  advanced  in  intelligence.  How  many  countries  are 
there,  where  many  of  the  best  employments  of  capital  are  altogether 
excluded  by  prejudices  that  the  government  alone  can  remove! 
How  many  cities  and  provinces,  where  certain  established  invest- 
ments of  capital  have  prevailed  from  time  immemorial !  In  one 
place,  every  body  invests  in  landed  property,  in  another,  in  houses, 
and  in  others  still,  in  public  offices  or  national  funds.  Every  unusual 
application  of  the  power  of  capital  is,  in  such  places,  contemplated 
with  distrust  or  disdain  ;  so  that  partiality  shown  to  a  profitable  mode 
of  employing  industry  or  capital  may  possibly  be  productive  of 
national  advantage. 

Moreover,  a  new  channel  of  industry  may  ruin  an  .unsupported 
speculator,  though  capable  of  yielding  enormous  profit,  when  the 
labourers  shall  have  acquired  practice,  and  the  novelty  has  once  been 
overcome.  France  at  present  contains  the  most  beautiful  manufac- 
tures of  silk  and  of  woollen  in  the  world,  and  is  probably  indebted 
for  them  to  the  wise  encouragement  of  Colbert's  administration, 
He  advanced  to  the  manufacturers  2000  /r.  for  every  loom  at  work; 
and,  by  the  way,  this  species  of  encouragement  has  a  very  peculiar 
advantage.  In  ordinary  cases,  whatever  the  government  levies  upon 
the  product  of  individual  exertion  is  wholly  lost  to  future  produc- 
tion ;  but,  in  this  instance,  a  part  was  employed  in  reproduction ;  a 
portion  of  individual  revenues  was  thrown  into  the  aggregate  pro- 
ductive capital  of  the  nation.  This  was  a  degree  of  wisdom  one 
could  hardly  have  expected,  even  from  personal  self-interest.f  (1) 

*  Wealth  of  Nations,  book  iv.  c.  2. 

f  I  am  far  from  equally  approving1  all  the  encouragements  of  this  kind  held 
out  by  this  minister;  particularly  the  sums  lavished  on  several  establishments  of 
pure  ostentation,  which,  like  that  of  the  Gobelin  tapestry,  have  constantly  cost 
more  than  they  have  produced. 

(1)   Our  author,  here,  has  permitted,  although  with  some  slight  qualification,, 
an  observation  to  escape  from  his  pen,  in  direct  contradiction  with  his  own  gene- 
ral principles,  and  which,  therefore,  it  is  necessary  to  point  out  and  refulo 
M  France,"  he  remarks,  in  speaking  of  her  manufactures  of  silk  and  woollen,  *'  * 
15* 


174  ON  PRODUCTION.  BOOK  I. 

It  would  be  out  of  place  here  to  inquire,  how  wide  a  field  boun- 
ties open  to  peculation,  partiality,  and  the  whole  tribe  of  abuses  in- 
cident to  the  management  of  public  affairs.  The  most  enlightened 

probably  indebted  for  them  to  the  wise  encouragement  of  Colbert's  administra- 
tion." What  is  this  but  admitting  that  beneficial  consequences  to  manufactures 
necessarily  flow  from  a  protecting  system  f  Now,  this  we  deny,  and,  in  support 
of  this  denial,  fortunately  can  at  present  invoke  the  highest  authority.  In  the 
report  on  the  commercial  relations  between  France  and  Great  Britain,  which  we 
cannot  too  often  refer  to  in  support  of  sound  principles,  Mr.  Villiers  and  Dr. 
Bowring,  both  on  this  point,  and  regarding  the  merits  and  character  of  Colbert's 
administration,  supply  us  with  the  following  admirable  strictures,  which  we 
have  great  satisfaction  in  presenting  to  our  readers.  They  will  be  found  to  con- 
tain a  complete  answer  to  the  gratuitous  assumption  of  M.  Say,  of  the  wisdom 
herein  displayed  by  Colbert  "  by  this  species  of  encouragement"  to  manu- 
factures. 

"  France  thus  became  the  country  which  adopted  and  still  exhibits  the  conse- 
quences of  a  protecting  system  on  a  large  scale.  Its  introduction  maybe  traced, 
or  rather  its  extension  as  far  as  possible,  to  Colbert,  a  minister  to  whose  name 
and  administration  a  great  portion  of  applause  has  been  given,  but  whose  system 
of  encouragement  was  based  on  a  complete  ignorance  of  the  true  principles  of 
commercial  legislation.  How  small  an  amount  of  manufacturing  prosperity 
Colbert  produced,  and  how  great  an  amount  of  agricultural,  commercial,  and 
manufacturing  wealth  he  either  destroyed  or  checked  in  its  natural  progress,  will 
be  obvious  to  any  observer  who  looks  at  the  immense  natural  resources  and  the 
active  intelligence  of  France.  It  may  be  safely  asserted,  that  the  whole  of  the 
bounties  by  which  he  induced  adventurers  to  enter  into  remote  speculations,  as 
well  as  the  excessive  duties  which  he  imposed  on  cheaper  foreign  articles,  were 
almost  uncompensated  sacrifices;  while,  on  the  other  hand,  of  the  manufactures 
which  he  transplanted  into  France,  and  which  he  protected  by  the  exclusion  of 
rival  productions,  scarcely  one  took  permanent  root ;  and  of  those  which  still 
exist,  and  which  he  intended  to  support,  there  is  perhaps  none  which  would  not 
•  have  been  more  prosperous  and  extensive,  but  for  those  regulations  with  which 
his  zeal  encumbered  the  early  march  of  manufacturing  industry.  The  popularity 
in  France  of  Colbert's  commercial  legislation,  and  the  erroneous  deductions 
drawn  from  the  consequences  of  his  interference,  have  produced  a  most  prejudi- 
cial effect  on  the  minds  of  a  large  portion  of  the  French  public.  Colbert's  sys- 
tem was  a  vain  attempt  to  force  capital  in  new  directions.  Thus,  in  order  to 
compel  the  establishment  of  a  trade  with  the  West  Indies,  he  made  the  French 
people  pay  a  premium  of  thirty  francs  upon  every  ton  of  goods  exported,  and  of 
fifty  francs  for  every  ton  of  goods  imported,  independently  of  other  encourage- 
ments. In  the  same  spirit,  he  incited  manufacturing  settlers,  by  large  rewards,  to 
establish  themselves  in  different  parts  of  France,  and  boasted  of  his  having  set 
up  more  than  40,000  looms,  whose  produce  was  protected  by  legal  enactments ; 
and  no  one  was  found  to  estimate  the  counterbalance  of  loss,  while  the  most  flat- 
tering, pictures  were  drawn  of  enormous  gain.  He  began  in  miscalculation ;  he 
brought  the  most  despotic  interference  to  support  his  errors ;  and,  if  their  conse- 
quences be  faithfully  traced,  they  will  be  found  little  creditable  to  his  own  saga- 
city, while  greatly  ruinous  to  the  nation  for  whose  benefit  they  were  intended. 
The  French  Revolution  broke  down  many  of  the  absurd  and  pernicious  regular 
tions  which  Colbert  had  introduced,  but  the  vestiges  of  others  remain;  and 
although  they  have  become  habitual,  they  interfere  with  improvement,  and  give 
superiority  to  countries  where  the  action  of  industry  and  capital  is  unfettered." 

"  Having  stated  thus  much,  it  would  be  unjust  to  withhold  from  Colbert  the 
credit  to  which  he  is-  entitled  for  the  admirable  order  he  established  in  the 
finances,  the  efforts  which  he  made  to  improve,  in  many  particulars,  the  system 
of  taxation,  and  his  opposition  to  the  inconsiderate  plan  of  funding  adopted 
bv  Louvois.  The  commercial  and  maritime  legislation  of  France  owes  to  him 


CHAP.  XVH.  ON  PRODUCTION.  175 

statesman  is  often  obliged  to  abandon  a  scheme  of  evident  public 
utility,  by  the  unavoidable  defects  and  abuses  in  the  execution. 
Among  these,  one  of  the  most  frequent  and  prominent  is,  the  risk  of 
paying  a  premium,  or  granting  a  favour  to  the  pretensions,  not  of 
merit,  but  of  importunity.  In  other  respects,  I  have  no  fault  to  find 
with  the  honours,  or  even  pecuniary  rewards  publicly  given  to 
artists  or  mechanics,  in  recompense  of  some  extraordinary  achieve- 
ment of  genius  or  address.  Rewards  of  this  kind  excite  emulation, 
and  enlarge  the  stock  of  general  knowledge,  without  diverting  in- 
dustry or  capital  from  their  most  beneficial  channels.  Besides,  they 
cost  nothing  in  comparison  of  bounties  of  another  description.  The 
bounty  on  the  export  of  wheat  has,  by  Smith's  account,  cost  England 
in  some  years  as  much  as  a  million  and  a  half  of  dollars.  I  do  not 
believe  that  the  British  or  any  other  •  government  ever  spent  the 
fiftieth  part  of  that  sum  upon  agriculture  in  any  one  year. 


SECTION  II. 
Of  the  Effect  of  Regulations  fixing  the  Manner  of  Production. 

The  interference  of  the  public  authority,  with  regard  to  the  details 
of  agricultural  production,  has  generally  been  of  a  beneficial  kind. 
The  impossibility  of  intermeddling  in  the  minute  and  various  details 
of  agriculture,  the  vast  number  of  agents  it  occupies,  often  widely 
separated  in  locality  and  pursuits,  from  the  largest  farming  concerns 
to  the  little  garden  of  the  cottager,  the  small  value  of  the  produce  in 
comparison  with  its  volume,  are  so  many  obstacles  that  nature  has 
placed  in  the  way  of  authoritative  restraint  and  interference.  All 
governments,  that  have  pretended  to  the  least  regard  for  the  public 

the  compilation  of  the  ordonnance  of  1681,  a  body  of  maritime  law  unrivalled  to 
this  moment." 

As  there  is,  also,  another  error,  in  the  same  paragraph,  we  must  be  allowed 
briefly  to  notice  it.  By  advancing  to  the  manufacturers  2000  francs  for  every 
loom  at  work,  our  author  thinks  Colbert  displayed  a  degree  of  wisdom  hardly  to 
be  expected,  inasmuch,  as  in  this  instance,  "  a  part  of  the  advance  would  be 
employed  in  reproduction,"  whereas,  according  to  him,  "  in  ordinary  cases,  what- 
ever the  government  levies  upon  the  products  of  individual  exertion  is  wholly 
lost  to  future  production."  Now,  nothing  can  be  more  clear,  than  that  the  tax 
levied,  for  the  payment  of  this  advance,  is  a  pure  loss  to  the  tax-paying  people, 
and  with  this  peculiar  aggravation,  that  a  large  class  of  the  tax-payers  are  not 
even  the  consumers  of  the  "  encouraged"  product.  Nor  is  it  exactly  true,  that  in 
"  ordinary  cases  whatever  the  government  levies  is  wholly  lost  to  future  produc- 
tion," for  whether  the  tax  be  advanced  for  every  loom  at  work,  or  for  the  work  of 
the  looms  themselves,  is  precisely  the  same  thing ;  and,  as  to  the  destination  of 
the  tax,  a  portion  of  it  is  quite  as  likely  to  be  employed  in  reproduction  in  the 
latter  as  in  the  former  case.  Finally,  where  the  tax  is  simply  an  "  encourage- 
ment" to  the  products,  the  amount  of  it  will  be  limited  by  the  effective  demand 
for  them,  whereas,  when  the  advance  is  made  for  every  loom  at  work,  there  is  no 
such  limit  to  a  useless  tax. 

AMERICAN  EDITOR 


176  ON  PRODUCTION.  BOOK  I. 

welfare,  have  consequently  confined  themselves  to  the  granting  of 
premiums  and  encouragements,  and  to  the  diffusion  of  knowledge 
which  has  often  contributed  largely  to  the  progress  of  this  art.  The 
veterinary  college  of  Alfort,  the  experimental  farm  of  Ramboullet, 
the  introduction  of  the  Merino  breed,  are  real  benefits  to  the  agri- 
culture of  France,  the  enlargement  and  perfection  of  which  she 
owes  to  the  providence  of  the  different  rulers  that  her  political 
troubles  have  successively  brought  into  power. 

A  national  administration  that  guards  with  vigilance  the  facility 
of  communication  and  the  quiet  prosecution  of  the  labours  of  hus- 
bandry, or  punishes  acts  of  culpable  negligence,  as  the  destroying 
of  caterpillars*  and  other  noxious  insects,  does  a  service  analogous 
to  the  preservation  of  civil  order  and  of  property,  without  which 
production  must  cease  altogether. 

The  regulations  relative  to  the  felling  of  trees  in  France,  how-ever 
indispensable  for  the  preservation  of  their  growth,  at  least  in  many 
of  their  provisions,  appear  in  others  rather  to  operate  as  a  discourage- 
ment of  that  branch  of  cultivation,  which,  though  particularly  adapted 
to  certain  soils  and  sites,  and  conducive  to  the  attraction  of  atmo- 
spheric moisture,  yet  seems  to  be  daily  on  the  decline. 

But  there  is  no  branch  of  industry  that  has  suffered  so  much  from 
the  officious  interference  of  authority  in  its  details,  as  that  of  manu- 
facture. 

Much  of  that  interference  has  been  directed  towards  limiting  the 
number  of  producers,  either  by  confining  them  to  one  trade  exclu- 
sively, or  by  exacting  specific  terms,  on  which  they  shall  carry  on 
their  business.  This  system  gave  rise  to  the  establishment  of  char- 
tered companies  and  incorporated  trades.  The  effect  is  always  the 
same,  whatever  be  the  means  employed.  An  exclusive  privilege,  a 
species  of  monopoly,  is  created,  which  the  consumer  pays  for,  and  of 
which  the  privileged  persons  derive  all  the  benefit.  The  monopo- 
lists can  prosecute  their  plans  of  self-interest  with  so  much  the  more 
ease  and  concert,  because  they  have  legal  meetings  and  a  regular 
organization.  At  such  meetings,  the  prosperity  of  the  corporation 
is  mistaken  for  that  of  commerce  and  of  the  nation  at  large ;  and  the 
last  thing  considered  is,  whether  the  proposed  advantages  be  the 
result  of  actual  new  production,  or  merely  a  transfer  from  one  pocket 
to  another,  from  the  consumers  to  the  privileged  producers.  This 
is  the  true  reason  why  those  engaged  in  any  particular  branch  of 
trade  are  so  anxious  to  have  themselves  made  the  subject  of  regula- 

*  Under  the  old  regime  of  the  canton  of  Berne,  every  proprietor  of  land  was 
required  to  furnish,  in  the  proper  season  of  the  year,  so  many  bushels  of  cock- 
chafers, in  proportion  to  the  extent  of  his  property.  The  rich  landholders  were 
in  the  habit  of  buying  their  contingents  from  the  poorest  sort  of  people,  who 
made  it  their  business  to  collect  them,  and  did  it  so  effectually,  that  the  district 
was  ultimately  cleared  of  them.  But  the  extreme  difficulty,  that  even  the  most 
provident  government  meets  with  in  doing  good  by  its  interference  in  the  busi- 
ness of  production,  may  be  judged  of  by  a  fact  of  which  I  am  credibly  assured, 
viz.  that  this  act  of  paternal  care  jfave  rise  to  the  singular  fraud  of  transporting 
these  insects  in  sacks  from  the  Savoy  side  of  the  Leman  lake  into  the  Pays  r/* 
Vaud. 


CHAP.  XVH.  ON  PRODUCTION.  177 

tion  ;  and  the  public  authorities  are  commonly,  on  their  part,  very 
ready  to  indulge  them  in  what  offers  so  fair  an  opportunity  of  raising 
a  revenue. 

Moreover,  arbitrary  regulations  are  extremely  flattering  to  the 
vanity  of  men  in  power,  as  giving  them  an  air  of  wisdom  and  fore- 
sight, and  confirming  their  authority,  which  seems  to  derive  addi- 
tional importance  from  the  frequency  of  its  exercise.  There  is,  per- 
haps, at  this  time,  no  country  in  Europe  where  a  man  is  free  to  dis- 
pose of  his  industry  and  capital  in  what  manner  he  pleases  ;  in  most 
places  he  cannot  even  change  his  occupation  or  place  of  residence 
at  pleasure.  It  is  not  enough  for  a  man  to  have  the  necessary  quali- 
fications of  ability  and  inclination  to  become  a  manufacturer  or 
dealer  in  the  woollen  or  silk  line,  in  spirits  or  calicoes;  he  must 
besides  have  served  his  time,  or  been  admitted  to  the  freedom  of  the 
craft.*  Freedoms  and  apprenticeships  are  likewise  expedients  of 
police,  not  of  that  wholesome  branch  of  police,  whose  object  is  the 
maintenance  of  public  and  private  security,  and  which  is  neither 
costly  nor  vexatious ;  but  of  that  sort  of  police  which  bad  govern- 
ments employ  to  preserve  or  extend  their  personal  authority  at  any 
expense.  By  the  dispensation  of  honorary  or  pecuniary  advantages, 
authority  can  generally  influence  the  chiefs  and  superiors  it  has 
appointed  to  the  corporations,  who  think  to  earn  those  honours  and 
emoluments  by  their  subservience  to  the  power  that  confers  them. 
These  are  the  ready  tools  for  the  management  of  the  body  at  large, 
and  volunteer  to  denounce  the  individuals,  whose  firmness  may  be 
formidable,  and  report  those  whose  servility  may  be  reckoned  upon, 
and  all  under  the  pretext  of  public  good.  Official  harangues  and 
public  addresses  are  never  wanting  in  plausible  reasons  for  the  con- 
tinuance of  old  restrictions  on  liberty  of  action,  or  for  the  establish- 
ment of  new  ones ;  for  there  is  no  cause  so  bad  as  to  be  without  some 
argument  or  other  in  its  favour. 

The  chief  advantage,  and  the  one  most  relied  upon,  is,  the  insu- 
rance of  a  more  perfect  execution  of  the  products  raised  for  con- 
sumption, and  of  a  superiority  in  them  highly  favourable  to  the  na- 
tional commerce,  and  calculated  to  secure  the  continued  demand  of 
foreigners.  But  does  this  advantage  result  from  the  system  in  ques- 
tion ?  What  security  is  there  that  the  corporate  body  itself  will  al- 
ways be  composed  of  men  not  merely  of  integrity,  but  of  scrupulous 
delicacy,  such  as  would  never  be  disposed  to  take  in  either  their  own 
countrymen  or  foreigners  1  We  are  told  that  this  system  facilitates 
the  enforcement  of  regulations  for  the  warranty  and  verification  of  the 
quality  of  products;  but  are  not  such  regulations  illusory  in  practice, 

*  When  industry  made  its  first  start  in  the  middle  ages,  and  the  mercantile 
classes  were  exposed  to  the  rapacity  of  a  grasping  and  ignorant  nobility,  incorpo- 
rated trades  and  crafts  were  useful  in  extending:  to  individual  industry  the  pro 
lection  of  the  association  at  large.  Their  utility  has  ceased  altogether  of  late 
years:  for  governments  have,  in  our  days,  been  either  too  enlightened  to 
encroach  upon  the  sources  of  financial  pros-perity.  or  too  powerful  to  stand  m 
awp  yf  such  associations. 

X 


178  ON  PRODUCTION.  BOOK  I. 

even  under  the  corporate  system  1  and,  supposing  them  absolutely 
necessary,  is  there  no  more  simple  way  of  enforcing  them  1 

Neither  will  the  length  of  apprenticeship  be  a  better  guarantee  of 
the  perfection  of  the  work ;  the  only  thing  to  be  depended  upon  for 
that  perfection  is  the  skill  of  the  workman,  and  that  is  best  attained 
by  paying  him  in  proportion  to  his  superiority.  "  To  teach  any 
young  man,"  says  Smith,  "  in  the  completest  manner  how  to  apply 
the  instruments,  and  how  to  construct  the  machines  of  the  common 
mechanic  trades,  cannot  well  require  the  lessons  of  more  than  a  few 
weeks,  perhaps  those  of  a  few  days  might  be  sufficient.  The  dex- 
terity of  hand,  indeed,  even  in  common  trades,  cannot  be  acquired 
without  much  practice  and  experience,  but  a  young  man  would  prac- 
tise with  much  more  diligence  and  attention,  if  from  the  beginning 
he  wrought  as  a  journeyman,  being  paid  in  proportion  to  the  little 
work  which  he  could  execute,  and  paying  in  his  turn  for  the  mate- 
rials which  he  might  sometimes  spoil  through  awkwardness  and  in- 
experience."* 

Were  apprentices  bound  out  a  year  later,  and  the  interval  spent 
in  schools  conducted  on  the  plan  of  mutual  instruction,  I  can  hardly 
think  the  products  would  be  worse  executed;  and,  beyond  all  doubt, 
the  labouring  class  would  be  advanced  a  stage  in  civilization. 

Were  apprenticeships  a  sure  means  of  obtaining  a  greater  perfec- 
tion of  products,  those  of  Spain  would  be  as  good  as  those  of  Britain. 
It  was  not  before  incorporated  trades  and  compulsory  apprentice- 
ships had  been  abolished  in  France,  that  she  attained  that  superiori- 
ty of  execution  she  has  now  to  boast  of. 

Perhaps  there  is  no  one  mechanic  art  nearly  so  difficult  as  that 
of  the  gardener  or  field  labourer;  yet  this  is  almost  the  only  one  that 
has  nowhere  been  subjected  to  apprenticeship.  Are  vegetables  and 
fruits  produced  in  less  abundance  or  perfection  ?  Were  cultivators 
a  corporate  body,  I  suppose  it  would  soon  be  asserted,  that  high- 
flavoured  peaches  and  white-heart  lettuces  could  not  be  raised  with- 
out a  code  of  some  hundred  well  penned-articles. 

After  all,  regulations  of  this  nature,  even  admitting  their  utility, 
must  be  nugatory  as  soon  as  evasion  is  allowed ;  now  it  is  notorious 
that  there  is  no  manufacturing  towns  where  money  will  not  pur- 
chase exemption.  -So  that  they  are  more  than  merely  useless  as  ? 
warranty  of  quality;  inasmuch  as  they  are  the  engine  of  the  mos> 
odious  injustice  and  extortion. 

In  support  of  these  opinions,  the  advocates  for  the  corporate  sys 
tern  appeal  to  the  example  of  Great  Britain,  where  industry  is  \\c\- 
known  to  be  greatly  shackled,  and  yet  manufactures  prosper.  BuJ 
in  this  they  expose  their  ignorance  of  the  real  causes  of  that  pros- 
perity. "  These  causes,"  Smith  tells  us,  "  seem  to  be  the  genera', 
liberty  of  trade,  which,  notwithstanding  some  restraints,  is  at  least 
equal,  perhaps  superior,  to  what  it  is  in  any  other  country ;  the 
liberty  of  exporting,  duty  free,  almost  all  sorts  of  goods,  which  are 
the  produce  of  domestic  industry,  to  almost  any  foreign  country; 

*  Wealth  of  Nations,  book  i.  c.  10. 


CHAP.  XVII.  ON  PRODUCTION.  179 

and,  what  perhaps  is  of  still  greater  importance,  the  unbounded 
liberty  of  transporting  them  from  any  one  part  of  our  own  country 
to  any  other,  without  being  obliged  to  give  any  account  to  any  pub- 
lic office,  without  being  liable  to  question  or  examination  of  any 
kind,"  &c.*  Add  to  these,  the  complete  inviolability  of  all  property 
whatever,  either  by  public  or  private  attack,  the  enormous  capital 
accumulated  by  her  industry  and  frugality,  and  lastly,  the  habitual 
exercise  of  attention  and  judgment,  to  which  her  population  is  trained 
from  the  earliest  years ;  and  there  is  no  need  of  looking  farther  for 
the  causes  of  the  manufacturing  prosperity  of  Britain. 

Those  who  cite  her  example  in  justification  of  their  desire  to 
enthral  the  exertions  of  industry,  are  not  perhaps  aware  that  the 
most  thriving  towns  in  that  kingdom,  those  on  which  her  character 
for  manufacturing  pre-eminence  is  mainly  built,  are  the  very  places 
where  there  are  no  incorporations  of  crafts  and  trades;  Manchester, 
Birmingham,  and  Liverpool,!  were  mere  villages  a  century  or  two 
ago,  but  now  rank  in  point  of  wealth  and  population  next  to  London, 
and  much  before  York,  Canterbury,  and  even  Bristol,  cities  of  the 
greatest  antiquity  and  privileges,  and  the  capitals  of  her  most  thriv- 
ing provinces,  but  still  subjected  to  the  shackles  of  these  Gothic 
institutions.  "  The  town  and  parish  of  Halifax,"  says  Sir  John 
Nickols,J  a  writer  of  acknowledged  local  information,  "  has,  within 
these  forty  years,  seen  the  number  of  its  inhabitants  quadrupled : 
whilst  many  other  towns,  subjected  to  corporations,  have  expe- 
rienced a  sensible  diminution  of  theirs.  Houses  situated  within  the 
precincts  of  the  city  of  London  hardly  find  tenants,  and  numbers  of 
them  remain  empty ;  whilst  Westminster,  Southvvark,  and  the  other 
suburbs  are  continually  increasing.  These  suburbs  are  free,  whilst 
London  supports  within  itself  four-score  and  twelve  exclusive  com- 
panies of  all  kinds,  of  which  we  may  see  the  members  annually 
adorn,  with  a  silly  pageantry,  the  tumultuous  triumphal  procession 
of  the  Lord  Mayor." 

The  prodigious  manufacturing  activity  of  some  of  the  suburbs  of 
Paris  is  notorious ;  of  the  Faubourg  St.  Antoine,  in  particular,  where 
industry  enjoyed  many  exemptions.  Some  products  were  made  no- 
where else.  How  happened  it,  that  without  apprenticeships,  or  the 
necessity  of  being  free  of  the  craft,  the  manufacturer  acquired  a 
greater  degree  of  skill,  than  in  the  rest  of  the  city,  which  was  subject 
to  those  institutions  that  are  held  up  as  so  indispensable  1  For  a 
very  simple  reason :  because  self-interest  is  the  best  of  all  instructors. 

An  example  or  two  will  serve  better  than  all  reasoning  in  the 
world,  to  show  the  impediments  thrown  in  the  way  of  the  develop- 

*  Wealth  of  Nations,  book  iv.  c.  7.                             I  Baert.  vol.  1.  p.  107. 
I  Remarks  on  the  Advantages  and  Disadvantages  of  France  and  of  Great 
Britain,  12mo.  1754,  §  4,  p.  142.  Q) 

,  (a)  This  work  was  originally  published  in  French  in  1752,  with  great  success, 
under  the  fictitious  name  of  Sir  John  Nickols,  and  is  supposed  to  have  been  the 
production  of  a  foreigner  employed  about  the  court  of  Versailles.  It  contain* 
many  judicious  remarks  upon  the  internal  policy  of  Britain.  T. 


180  ON  PRODUCTION.  BOOK  L 

ment  of  industry  by  incorporations  of  trades  and  crafts.  Argand, 
the  inventor  of  the  lamps  that  go  by  his  name,  and  yield,  at  the  same 
expense,  triple  the  amount  of  light,  was  dragged  before  the  Parle- 
rnenl  de  Paris,  by  the  company  of  tinmen,  locksmiths,  ironmongers, 
and  journeymen  farriers,  who  claimed  the  exclusive  right  of  making 
lamps.*  Lenoir,  the  celebrated  Parisian  philosophical  and  mathe- 
matical instrument  maker,  had  set  up  a  small  furnace  for  the  con- 
venience of  working  the  metals  used  in  his  business.  The  syndics 
of  the  founders'  company  came  in  person  to  demolish  it ;  and  he 
was  obliged  to  apply  to  the  king  for  protection.  Thus  was  talent 
dependent  upon  court  favour.  The  manufacture  of  japanned  hard 
ware  was  altogether  excluded  from  France  until  the  era  of  the  revo- 
lution, by  the  circumstance  of  its  requiring  the  skill  and  implements 
of  many  different  trades,  and  the  necessity  of  being  admitted  to  the 
freedom  of  them  all,  before  an  individual  could  carry  it  on.  It  would 
be  easy  to  fill  a  volume  with  the  recapitulation  of  the  disheartening 
vexations  that  personal  industry  had  to  encounter  in  the  city  of  Paris 
alone,  under  the  corporate  system ;  and  another  with  that  of  the  suc- 
cessful efforts  made,  since  that  system  was  abolished  by  the  revolution. 
For  the  same  reason  that  the  free  suburb  of  a  chartered  town,  or 
a  free  town  in  the  midst  of  a  country  embarrassed  by  the  officious- 
ness  of  a  meddling  government,  will  exhibit  an  unusual  degree  of 
prosperity,  a  nation  that  enjoys  the  freedom  of  industry,  in  the  midst 
of  others  following  the  corporate  system,  would  probably  reap  simi- 
mr  advantages.  Those  have  thriven  the  most,  that  have  been  the 
least  shackled  by  the  observance  of  formalities,  provided,  of  course, 
that  individuals  be  secured  from  the  exactions  of  power,  the  chica- 
nery of  law,  and  the  attempts  of  dishonesty  or  violence.  Sully, 
whose  whole  life  was  spent  in  the  study  and  practice  of  measures 
for  improving  the  prosperity  of  France,  entertained  this  opinion.f 
In  his  memoirs,  he  notices  the  multiplicity  of  useless  laws  and  ordi- 
nances, as  a  direct  barrier  to  the  national  progress.! 

*  "  Why  not  get  himself  made  free  of  the  company  1"  say  those  who  are  ever 
ready  to  palliate  or  justify  official  abuse.  The  corporation,  which  had  the  con- 
trol over  admissions,  was  itself  interested  in  thwarting  a  dangerous  competitor. 
Besides,  why  compel  the  ingenious  inventor  to  waste  in  a  personal  canvass,  that 
time  which  would  be  so  much  more  profitably  occupied  in  his  calling ! 

t  L?v.  xix. 

I  ColberCs  early  education  in  the  counting-house  of  the  Messrs.  Mascrani,  of 
Lyons,  a  very  considerable  mercantile  establishment,  very  early  imbued  him 
with  the  principles  of  the  manufacturers.  Commerce  and  manufacture  thrived 
prodigiously  under  his  powerful  and  judicious  patronage ;  but,  though  he  liberated 
them  from  abundance  of  oppression,  he  was  himself  hardly  sparing  enough  of 
ordinances  and  regulations  ;  he  encouraged  manufactures  at  the  expense  of  agri- 
culture, and  saddled  the  people  at  large  with  the  extraordinary  profits  of  monopo- 
list;!. We  cannot  shut  our  eyes  to  the  fact,  that  to  this  system,  acted  upon  ever 
pince  the  days  of  Colbert,  France  owed  the  striking  inequalities  of  private  for- 
tune, the  overgrown  wealth  of  some,  and  the  superlative  misery  of  others ;  the 
contrast  of  a  few  splendid  establishments  of  industry,  with  a  wide  waste  of 
poverty  and  degradation.  This  is  no  ideal  picture,  but  one  of  sad  reality,  wt.ich 
.lie  study  of  principles  will  help  us  to  explain. 


CHAP.  XVII.  ON  PRODUCTION.  1S1 

It  may,  perhaps,  be  alleged,  that,  were  all  occupations  quite  free, 
a  large  proportion  of  those  who  engaged  in  them  would  fall  a  sacri- 
fice to  the  eagerness  of  competition.  Possibly  they  might,  in  some 
few  instances,  although  it  is  not  very  likely  there  should  be  a  great 
excess  of  candidates  in  a  line,  that  held  out  but  little  prospect  of  gain ; 
yet,  admitting  the  casual  occurrence  of  this  evil,  it  would  be  of 
infinitely  less  magnitude,  than  permanently  keeping  up  the  prices  of 
produce  at  a  rate  that  must  limit  its  consumption,  and  abridge  the 
power  of  purchasing  in  the  great  body  of  consumers. 

If  the  measures  of  authority,  levelled  against  the  free  disposition 
of  each  man's  respective  talents  and  capital,  are  criminal  in  the  eye 
of  sound  policy,  it  is  still  more  difficult  to  justify  them  upon  the 
principles  of  natural  right.  "  The  patrimony  of  a  poor  man,"  says 
the  author  of  the  Wealth  of  Nations,  "  lies  in  the  strength  and  dex- 
terity of  his  hands :  and  to  hinder  him  from  employing  this  strength 
and  dexterity  in  what  manner  he  thinks  proper,  without  injury  tc 
his  neighbour,  is  a  plain  violation  of  his  most  sacred  property." 

However,  as  society  is  possessed  of  a  natural  right  to  regulate  the 
exercise  of  any  class  of  industry,  that  without  regulation  might  pre- 
judice the  rest  of  the  community,  physicians,  surgeons,  and  apothe- 
caries, are  with  perfect  justice  subjected  to  an  examination  into  their 
professional  ability.  The  lives  of  their  fellow-citizens  are  dependent 
upon  their  skill,  and  a  test  of  that  skill  may  fairly  be  established ; 
but  it  does  not  seem  advisable  to  limit  the  number  of  practitioners 
nor  the  plan  of  their  education.  Society  has  no  interest  further  than 
to  ascertain  their  qualification. 

On  the  same  grounds,  regulation  is  useful  and  proper,  when  aimed 
at  the  prevention  of  fraud  or  contrivance,  manifestly  injurious  to 
other  kinds  of  production,  or  to  the  public  safety,  and  not  at  pre- 
scribing the  nature  of  the  products  and  the  methods  of  fabrication. 
Thus,  a  manufacturer  must  not  be  allowed  to  advertise  his  goods  to  the 
public  as  of  better  than  their  actual  quality :  the  home  consumer  is 
entitled  to  the  public  protection  against  such  a  breach  of  faith ;  and 
so,  indeed,  is  the  mercantile  character  of  the  nation,  which  must  suf- 
fer in  the  estimation  and  demand  of  foreign  customers  from  such 
practices.  And  this  is  an  exception  to  the  general  rule,  that  the  best 
of  all  guarantees  is  the  personal  interest  of  the  manufacturer.  For, 
possibly,  when  about  to  give  up  business,  he  may  find  it  answer  to 
increase  his  profit  by  a  breach  of  faith,  and  sacrifice  a  future  objec* 
he  is  about  to  relinquish  for  a  present  benefit  A  fraud  of  this  kind 
ruined  the  French  cloths  in  the  Levant  market,  about  the  year 
1783;  since  when  the  German  and  British  have  entirely  supplanted 
them.*  We  may  go  still  further.  An  article  often  derives  a  value 
from  the  name,  or  from  the  place  of  its  manufacture.  When  we 
judge  from  long  experience,  that  cloths  of  such  a  denomination,  and 

*  The  loss  of  this  trade  has  been  erroneously  imputed  to  the  liberty  or'  com- 
merce, consequent  upon  the  revolution.    But  Felix  Beaujour,  in  his  Tableau  dv 
Commerce  de  la  Grece,  has  shown  that  it  must  be  referred  to  an  earlier  perietl, 
when  restrictions  were  still  in  force. 
16 


182  ON  PRODUCTION.  BOOK  I. 

made  at  such  a  place,  will  be  of  a  certain  breadth  and  substance,  it 
is  a  fraud  to  fabricate,  under  the  same  name  and  at  the  same  place, 
a  commodity  of  inferior  substance  and  quality  to  the  ordinary  stand- 
ard, and  thus  to  send  it  into  the  world  under  a  false  certificate. 

Hence  we  may  form  an  opinion  of  the  extent  to  which  govern- 
ment may  carry  its  interference  with  benefit.  The  correspondence 
with  the  sample  of  conditions,  express  or  implied,  must  be  rigidly 
enforced,  and  government  should  meddle  with  production  no  further. 
I  would  wish  to  impress  upon  my  readers,  that  the  mere  interference 
is  itself  an  evil,  even  where  it  is  of  use  :*  first,  because  it  harasses  and 
distresses  individuals ;  and,  secondly,  because  it  costs  money,  either 
to  the  nation,  if  it  be  defrayed  by  government,  that  is  to  say,  charged 
upon  the  public  purse,  or  to  the  consumer,  if  it  be  charged  upon  the 
specific  article ;  in  the  latter  case,  the  charge  must  of  course  enhance 
the  price,  thereby  laying  an  additional  tax  upon  the  home  consumer, 
and  pro  tanto  discouraging  the  foreign  demand. 

If  interference  be  an  evil,  a  paternal  government  will  be  most 
sparing  of  its  exercise.  It  will  not  trouble  itself  about  the  certifica- 
tion of  such  commodities,  as  the  purchaser  must  understand  better 
than  itself;  or  of  such  as  cannot  well  be  certified  by  its  agents ;  for, 
unfortunately,  a 'government  must  always  reckon  upon  the  negli- 
gence, incapacity,  and  misconduct  of  its  retainers.  But  some  arti- 
cles may  well  admit  of  certification ;  as  gold  and  silver,  the  standard 
of  which  can  only  be  ascertained  by  a  complex  operation  of  chem- 
istrv,  which  few  purchasers  know  how  to  execute,  and  which,  if 
they  did,  would  cost  them  infinitely  more  than  it  can  be  executed 
for  by  the  government  in  their  stead. 

In  Great  Britain,  the  individual  inventor  of  a  new  product  or  of  a 
new  process  may  obtain  the  exclusive  right  to  it,  by  obtaining  what 
is  called  a  patent.  While  the  patent  remains  in  force,  the  absence  01 
competitors  enables  him  to  raise  his  price  far  above  the  ordinary 
return  of  his  outlay  with  interest,  and  the  wages  of  his  own  in- 
dustry. Thus  he  receives  a  premium  from  the  government,  charged 
upon  the  consumers  of  the  new  article ;  and  this  premium  is  often 
very  large,  as  may  be  supposed  in  a  country  so  immediately  produc- 
tive as  Great  Britain,  where  there  are  consequently  abundance  of 
affluent  individuals,  ever  on  the  look-out  for  some  new  object  of 
enjoyment.  Some  years  ago  a  man  invented  a  spiral  or  worm  spring 
for  insertion  between  the  leather  braces  of  carriages,  to  ease  their 
motion,  and  made  his  fortune  by  the  patent  for  so  trifling  an  invention. 

Privileges  of  this  kind  no  one  can  reasonably  object  to ;  for  they 
neither  interfere  with,  nor  cramp  any  branch  of  industry,  previously 
In  operation.  Moreover,  the  expense  incurred  is  purely  voluntary ; 
and  those  who  choose  to  incur  it,  are  not  obliged  to  renounce  the  satis- 
faction of  any  previous  wants,  either  of  necessity  or  of  amusement. 

*  "  Every  restraint,  imposed  by  legislation,  upon  the  freedom  of  human  action 
must  inevitably  extinguish  a  portion  of  the  energies  of  the  community,  and 
abridge  its  annual  product." — Verri.  Refl.  sur  VEcon.  Pol.  c.  12. 


CHAP.  XVII.  ON  PRODUCTION.  183 

However,  as  it  is  the  duty  of  every  government  to  aim  at  the 
constant  amelioration  of" its  subjects'  condition,  it  cannot  deprive  other 
producers  to  eternity  of  the  right  to  employ  part  of  their  industry 
and  capital  in  this  particular  channel,  which  perhaps  they  might 
sooner  or  later  have  themselves  discovered,  or  preclude  the  con- 
sumer for  a  very  long  period  from  the  advantages  of  a  competition- 
price.  Foreign  nations  being  out  of  its  jurisdiction,  would  of  course 
grant  no  privilege  to  the  inventor,  and  would,  therefore,  in  this  par- 
ticular, during  the  operation  of  the  patent,  be  better  otf  than  the 
nation  where  the  invention  originated. 

France*  has  imitated  the  wise  example  of  England,  in  assigning  a 
limit  to  the  duration  of  these  patent  rights,  after  which  the  invention 
is  free  for  all  the  world  to  avail  themselves  of.  It  is  also  provided, 
that,  if  the  process  be  capable  of  concealment,  it  shall  be  divulged  at 
the  expiration  of  the  term.  And  the  patentee,  who  in  this  case,  it 
may  be  supposed,  could  do  without  the  patent,  has  this  advantage : 
that  if  his  secret  be  discovered  by  any  body  in  the  interim,  it  cannot 
be  made  available  till  the  expiration  of  the  term. 

Nor  is  it  at  all  necessary  that  the  government  sriouid  inquire  into 
the  novelty  or  utility  of  the  invention ;  for,  if  it  be  useless,  so  much 
the  worse  for  the  inventor,  and,  if  it  be  already  known,  every  body 
is  competent  to  plead  and  prove  that  fact,  and  the  previous  right  of 
the  public ;  so  that  the  only  sufferer  is  the  inventor,  who  has  been 
at  the  expense  of  a  patent  for  nothing.  Thus  the  public  is  no  loser 
by  this  species  of  encouragement,  but,  on  the  contrary,  may  derive 
prodigious  advantage. 

The  regulations  tending  to  direct  either  the  object  or  the  method 
of  production,  which  have  been  above  observed  upon,  by  no  means 
comprise  all  the  measures  adopted  by  different  nations  with  those 
views.  Indeed,  were  I  to  specify  them  all,  my  catalogue  would 
soon  be  incomplete ;  for  new  ones  are  every  day  brought  into  prac- 
tice. The  great  point  is,  to  lay  down  certain  principles,  that  may 
enable  us  beforehand  to  judge  of  their  consequences.  But  there  are 
two  other  branches  of  commerce,  that  have  been  the  subject  of  more 
than  usual  regulation,  and  are,  therefore,  worthy  of  more  special 
investigation.  I  shall  devote  the  two  succeeding  sections  to  their 
exclusive  examination. 

j 

SECTION  IIL 

Of  Privileged  Trading  Companies. 

A  government  sometimes  grants  to  individual  merchants,  and 
much  oftener  to  trading  companies,  the  exclusive  privilege  of  buying 
and  selling  specific  articles,  tobacco  for  example ;  OF  of  trafficking 
with  a  particular  country,  as  with  India. 

*  Vide  the  laws  dated  7th  Jan.  and  25th  May,  1791,  and  120th  Sept.  1792 
Also  the  arret  of  the  government,  dated  5  Vandemaire,  an.  ix. 


184  ON  PRODUCTION.  Boon  L 

The  privileged  traders,  being  thus  exempted  from  all  competition 
by  the  exertion  of  the  public  authority,  can  raise  their  prices  above 
the  level  that  could  be  maintained  under  the  operation  of  a  free 
trade.  This  unnatural  ratio  of  price  is  sometimes  fixed  by  the 
government  itself,  which  thus  assigns  a  limit  to  the  partiality  it  ex- 
ercises towards  the  producers,  and  the  injustice  it  practises  upon  the 
consumers:  otherwise,  the  avarice  of  the  privileged  company  would 
be  bounded  only  by  the  dread  of  losing  more  by  the  reduction  of 
the  gross  amount  of  its  sales,  in  consequence  of  increased  prices, 
than  it  would  gain  by  their  unnatural  elevation.  At  all  events,  the 
consumer  pays  for  the  commodity  more  than  its  worth ;  and  govern- 
ment generally  contrives  to  share  in  the  profits  of  the  monopoly. 

It  has  been  said,  for  the  most  ruinous  expedient  is  sure  to  find 
some  plausible  argument  or  other  to  support  it,  that  the  commerce 
with  certain  nations  requires  precautionary  measures,  which  privi- 
leged companies  only  can  enforce.  At  one  time  thg  plea  is,  that 
forts  must  be  built,  and  marine  establishments  kept  up ;  as  if  in  truth 
it  were  worth  while  to  traffic  sword  in  hand,  or  an  army  were  neces- 
sary to  protect  plain  dealing ;  or  as  if  the  state  did  not  already  main- 
tain at  great  charge  a  military  force  for  the  protection  of  its  subjects ! 
At  another,  that  diplomatic  address  is  indispensable.  The  Chinese, 
for  instance,  are  a  people  so  bigoted  to  form  and  prone  to  suspicion — 
so  entirely  independent  of  other  nations,  by  reason  of  their  remote 
position,  the  extent  of  their  territory,  and  the  peculiar  character  of 
their  wants,  that  is  a  matter  of  special  and  precarious  favour  to  be 
allowed  to  deal  with  them.  We  must,  therefore,  elect  either  to  go 
without  their  teas,  silks,  and  nankeens,  or  be  content  to  submit  tc 
precautions,  which  can  alone  insure  the  continuance  of  the  trade ; 
for  the  dealings  of  individuals  might  endanger  the  continuance  of 
that  good  humour,  without  which  the  mutual  intercourse  of  the  two 
nations  would  be  at  an  end. 

But,  let  me  ask,  is  it  so  certain  that  the  agents  of  a  company,  who 
are  too  apt  to  presume  upon  the  support  of  the  military  power, 
either  of  the  nation  or  at  least  of  the  company, — is  it  quite  certain, 
that  such  agents  are  more  likely  to  keep  alive  an  amicable  feeling 
than  private  traders,  in  whom  more  deference  to  local  institutions 
might  be  expected,  and  who  would  have  an  immediate  interest  in 
keeping  clear  of  any  misunderstanding  that  should  endanger  both 
their  persons  and  their  property  ?* 

But,  supposing  the  worst  that  could  happen,  and  granting,  for 
argument's  sake,  that  the  trade  with  China  can  not  be  conducted 
otherwise  than  by  a  privileged  company,  does  it  follow,  that  with 
out  one  we  must  needs  give  up  the  taste  for  Chinese  productions? 

*  This  has  been  exemplified  in  the  commercial  relations  of  the  United  States 
with  China.  The  American  traders  conduct  themselves  at  Canton  with  more 
discretion,  and  are  regarded  by  the  Chinese  authorities  with  less  jealousy  than 
the  agents  of  the  English  company.  The  Portuguese,  for  upwards  of  a  century, 
carried  on  the  trade  with  the  Eastern  seas,  without  the  intervention  of  a  corn- 
nan  y,  and  with  greater  success  than  any  of  their  contemporaries. 


CHAP.  XVII.  ON  PRODUCTION.  135 

Certainly  not.  The  trade  in  Chinese  goods  will  always  exist,  for 
this  plain  reason,  that  it  suits  both  parties,  the  Chine'se  and  their 
customers.  But  shall  we  not  pay  dearer  for  those  goods '?  There  is 
no  ground  for  thinking  so.  Three-fourths  of  the  European  states 
have  never  sent  a  single  ship  to  China,  and  yet  are  abundantly  sup- 
plied with  teas,  with  silks,  and  with  nankeens,  and  that  too  at  a  very 
cheap  rate. 

There  is  another  argument  of  more  general  application,  and  still 
more  frequently  urged ;  viz.  that  a  company,  having  the  exclusive 
trade  of  any  given  country,  is  exempt  from  the  effects  of  competi- 
tion, and,  therefore,  buys  at  a  less  price.  But,  in  the  first  place,  it 
is  not  true  that  the  exclusive  privilege  exempts  from  the  effect  of 
competition :  the  only  competition  it  removes,  is  that  of  the  national 
traders,  which  would  be  of  the  utmost  benefit  to  the  nation ;  but  it 
excludes  neither  the  competition  of  foreign  companies,  nor  of  foreign 
private  traders.  In  the  next  place,  there  are  many  articles  that 
would  not  rise  in  price  in  consequence  of  the  competition,  which 
some  people  affect  to  be  alarmed  at,  though  in  truth  it  is  a  mere 
bugbear. 

Suppose  Marseilles,  Bordeaux,  L'Orient,  were  all  to  fit  out  vessels 
to  bring  tea  from  China,  we  have  no  reason  to  believe  that  all  their 
ventures  together  would  import  more  tea  into  France,  than  France 
could  consume  or  dispose  of.  All  we  have  to  fear  is,  that  they  should 
not  import  enough.  Now,  if  they  were  to  import  no  more  than  other 
merchants  would  have  imported  for  them,  the  demand  for  tea  in 
China  will  have  been  just  the  same  in  both  cases ;  consequently,  the 
commodity  will  not  have  become  more  scare  there. '  Our  merchants 
would  hardly  have  to  pay  dearer  for  it,  unless  the  price  should  rise 
in  China  itself;  and  what  sensible  effect  could  the  purchases  of  a  few 
merchants  of  France  have  upon  the  price  of  an  article  consumed  in 
China  itself,  to  one  hundred  times  the  amount  of  the  whole  consump- 
tion of  Europe  ? 

But,  granting  that  European  competition  would  operate  to  raise 
the  price  of  some  commodities  in  the  eastern  market,  is  that  a  suffi- 
cient motive  for  excepting  the  trade  to  that  part  of  the  world  from 
the  general  rules  that  are  acted  upon  in  all  other  branches  of  com- 
merce ?  Are  we  to  invest  an  exclusive  company  with  the  sole  con- 
duct of  the  import  or  export  trade  between  Germany  and  France,  for 
the  sole  purpose  of  getting  our  cottons  and  woollens  from  Germany 
at  a  cheaper  rate  ?  If  the  commerce  of  the  East  were  put  upon  the 
same  footing  as  foreign  trade  in  general,  the  price  of  any  one  article 
of  its  produce  could  never  long  remain  much  above  the  cost  of  pro- 
duction in  Asia;  for  the  rise  of  price  would  operate  as  a  stimulus  to 
increased  production,  and  the  competition  of  sellers  would  soon  be  on 
a  par  with  that  of  purchasers. 

But,  admitting  the  advantage  of  buying  cheap  to  be  as  substantial 

as  it  is  represented,  the  nation  at  large  has  a  right  to  participate  in 

that  cheapness ;  the  home  consumers  ought  to  buy  cheap  as  well  as 

the  company.    Whereas  in  practice  it  is  just  the  reverse,  and,  for  a 

16*  Y 


186  '    *  ON  PRODUCTION.  BOOK  L 

very  simple  reason:  the  company  is  not  exempt  fiom  competition  as 
a  purchaser,  for  other  nations  are  its  competitors :  but  as  a  seller  it  is 
exempt;  for  the  rest  of  the  nation  can  buy  the  articles  it  deals  in  no- 
where else,  the  import  by  foreigners  being  wholly  prohibited.  It 
asks  its  own  price,  and  can  command  the  market,  especially  if  it  be 
attentive  to  keep  the  market  always  understocked,  as  the  English 
call  it ;  that  is,  if  the  supply  be  just  so  far  short  of  the  demand,  as  to 
keep  alive  the  competition  of  purchasers.* 

In  this  manner,  trading  companies  not  only  extort  exorbitant 
profits  from  the  consumer,  but  moreover  saddle  him  with  all  the 
fraud  and  mismanagement  inseparable  from  the  conduct  of  these 
unwieldy  bodies,  with  their  cumbrous  organisation  of  directors  and 
factors  without  end,  dispersed  from  one  extremity  of  the  globe  to  the 
other.  The  only  check  to  the  gross  abuses  of  these  privileged 
bodies  is  the  smuggling,  or  contraband  trade,  which,  in  this  point  of 
view,  may  lay  claim  to  some  degree  of  utility. 

This  analysis  brings  us  to  the  point  in  question;  are  the  gains  of 
the  privileged  company,  national  gains?  Undoubtedly  not;  for  they 
are  wholly  taken  from  the  pockets  of  the  nation  itself.  The  whole 
excess  of  value,  paid  by  the  consumer,  beyond  the  rate  at  which  free 
trade  could  afford  the  article,  is  not  a  value  produced,  but  so  much 
existing  value  presented  by  the  government  to  the  trader  at  the  con- 
sumer's expense.  It  will  probably  be  urged,  that  it;  must  at  least  bo 
admitted,  that  this  profit  remains  and  is  spent  at  home.  Granted  . 
but  by  whom  is  it  spent  1  that  is  the  point.  Should  one  member  of 
a  family  possess  himself  of  the  whole  family  income,  dress  himself 
in  fine  clothes,  and  devour  the  best  of  every  thing,  what  consolation 
would  it  be  to  the  rest  of  the  family,  were  he  to  say,  what  signifies 
it  whether  you  or  I  spend  the  money  ?  the  income  spent  is  the  same, 
so  it  can  make  no  difference. 

The  exclusive  as  well  as  excessive  profits  of  monopoly  would  soon 
glut  the  privileged  companies  with  wealth,  could  they  depend  upon 
the  good  management  of  their  concerns ;  but  the  cupidity  of  agents, 
tne  long  pendency  of  distant  adventures,  the  difficulty  of  bringing 
factors  abroad  to  account,  and  the  incapacity  of  those  interested,  are 
causes  of  ruin  in  constant  activity.  Long  and  delicate  operations  of 
commerce  require  superior  exertion  and  intelligence  in  the  parties 
interested.  And  how  can  such  qualities  be  expected  in  shareholders, 
amounting  sometimes  to  several  hundreds,  all  of  them  having  other 
matters  of  more  personal  importance  to  look  after  ?f 

Such  are  the  consequences  of  privileges  granted  to  trading  compa- 

*  It  is  well  known,  that,  when  the  Dutch  were  in  possession  of  the  Moluccas, 
they  were  in  the  habit  of  burning  part  of  the  spices  they  produced,  for  the  sake 
of  keeping  up  the  price  in  Europe. 

f  The  answer  of  La  Bourdonnais  to  one  of  the  directors  of  the  French  East 
India  Company,  who  asked  how  it  was,  that  he  had  managed  his  own  interests 
so  much  better  than  those  of  the  company,  will  long  be  remembered: — "Be- 
cause," said  he,  "  I  manage  my  own  affairs  according  to  the  dictates  of  my  own 
judgment  but  am  obliged  to  follow  your  instructions  in  regard  to  those  of  the 
company." 


CHAP.  XVII.  ON  PRODUCTION.  187 

nies :  and  these  consequences,  it  must  be  observed,  are  in  the  nature 
of  things  inseparable ;  circumstances  may  reduce  their  efficacy,  but 
can  never  remove  them  altogether.  The  English  East  India  Com- 
pany has  met  with  more  success  than  the  three  or  four  French  ones 
that  at  different  times  made  the  experiment.*  This  company  is 
sovereign  as  well  as  merchant ;  and  we  know,  by  experience,  that  the 
most  detestable  governments  may  last  for  several  generations ;  wh> 
ness  that  of  the  Mamelukes  in  Egypt.  (1) 

There  are  some  minor  evils  also  incident  to  commercial  privileges. 
The  grant  of  exclusive  rights  frequently  exiles  from  a  country  a 
branch  of  industry  and  a  portion  of  capital  that  would  readily  have 
taken  root  there,  but  are  compelled  to  settle  abroad.  Towards  the 
close  of  the  reign  of  Louis  XIV.  the  French  East  India  Company, 
being  unable  to  support  itself,  notwithstanding  its  exclusive  rights, 
transferred  the  exercise  of  its  privileges  to  some  speculators  at  St. 
Malo,  in  consideration  of  a  small  share  in  their  profits.  The  trade 
began  to  revive  under  the  influence  of  this  comparative  liberty,  and 
would,  on  the  expiration  of  the  company's  charter,  in  1714,  have 
been  as  active  as  the  then  melancholy  condition  of  France  would 
have  permitted :  but  the  company  petitioned  for  a  renewal,  and  ob- 
tained one,  pending  the  ventures  of  some  private  traders.  Soon 
afterwards,  a  vessel  of  St.  Malo,  commanded  by  a  Breton  of  the 
name  of  Lamerville,  appeared  upon  the  French  coast,  on  its  return 
from  the  East  Indies,  but  was  refused  permission  to  enter  the  har- 
bour, on  the  plea,  that  it  was  in  contravention  of  the  company's 
rights.  Consequently,  he  was  compelled  to  prosecute  his  voyage  to 
the  nearest  port  in  Belgium,  and  carried  his  vessel  into  Ostend, 
where  he  disposed  of  the  cargo.  The  governor  of  the  Low  Coun- 
tries, hearing  of  the  enormous  profits  he  had  made,  proposed  to  the 
captain  a  second  voyage,  with  a  squadron  to  be  fitted  out  for  the 
express  purpose ;  and  Lamerville  afterwards  performed  many  simi- 

*  The  first  French  East  India  Company  was  established  in  the  reign  of  Henry 
IV.  A.  D.  1604,  at  the  instance  of  a  Fleming  of  the  name  of  Gerard  Leroi.  It 
met  with  no  success. 


(1)  The  commercial  monopoly  of  the  English  East  India  Company  was  finally 
abolished  by  three  acts  of  Parliament,  passed  during  the  year  1833,  namely, 
chapters  85,  93,  and  101  of  the  3d  and  4th  William  IV.  The  first  is  entitled,  an 
act  for  effecting  an  arrangement,  with  the  East  India  Company,  and  for  the  better 
government  of  "His  Majesty's  Indian  territories,  till  the  30th  day  of  April,  1851; 
the  second,  an  act  to  regulate  the  trade  of  China  and  India ;  and  the  third,  an  act 
to  provide  for  the  collection  and  management  of  duties  on  tea. 

By  these  acts  the  trade  with  both  China  and  India  is  thrown  open,  for  the  first 
time,  to  British  enterprise  and  capital,  and  British  subjects  are  also  permitted  to 
take  up  their  residence  in  these  countries.  It  is  needless  to  point  out  the  vast 
importance  of  these  enactments,  and  the  great  advantages  that  must  result  from 
them,  not  only  to  British  subjects,  but  to  the  whole  commercial  world.  The 
resources  of  regions  of  rich  countries  that  have  hitherto  lain  dormant  will  now 
be  called  into  activity,  and  the  general  wealth  of  the  country,  and  its  capacity  of 
absorbing  foreign  commodities,  immensely  increased. 

AMERICAN  EDITOR. 


188  ON  PRODUCTION.  BOOK  I. 

lar  voyages  for  different  employers,  and  laid  the  foundation  of  the 
Ostend  Company.* 

Thus,  the  French  consumer  must  necessarily  have  suffered  by 
this  monopoly :  and  so,  in  fact,  he  did.  But,  at  any  rate,  it  will  be 
supppsed,  the  company  must  have  benefited.  Just  the  contrary: 
the  company  was  itself  ruined ;  in  spite  of  the  monopoly  of  tobacco, 
the  lotteries,  and  other  subsidiary  grants  bestowed  on  them  by  the 
government.!  "  In  short,"  says  Voltaire,J  "  all  that  remained  to 
France  in  the  East  was  the  regret  of  having,  in  the  course  of  forty 
years,  squandered  enormous  sums,  to  bolster  up  a  company  that 
never  made  a  six-pence  profit,  never  made  any  dividend  from  the 
resources  of  its  commerce,  either  to  its  share-holders  or  creditors ; 
and  supported  its  establishments  in  India,  solely  by  the  underhand 
practice  of  pillage  and  extortion  upon  the  natives." 

The  only  case  in  which  the  establishment  of  an  exclusive  com- 
pany is  justifiable,  is,  when  there  is  no  other  way  of  commencing  a 
new  trade  with  distant  or  barbarous  nations.  In  that  case,  the 
charter  is  a  kind  of  patent  of  invention,  and  confers  an  advantage, 
commensurate  to  the  extraordinary  risk  and  expense  of  the  first 
experiment.  The  consumers  have  no  reason  to  complain  of  the 
dearness  of  products,  which,  but  for  the  grant  of  the  charter,  they 
would  either  not  have  enjoyed  at  all,  or  have  enjoyed  at  a  still 
dearer  rate.  But  such  grants  should,  like  patents,  be  limited  to  such 
duration  only,  as  will  repay  and  fully  indemnify  the  adventurers  for 
the  advances  and  risk  incurred.  Any  thing  further  is  a  mere  free 
gift  to  the  company,  at  the  expense  of  the  nation  at  large,  who  have 
a  natural  right  to  get  what  they  want  wherever  they  can,  and  at  the 
lowest  possible  price. 

What  has  been  said  with  respect  to  commercial  is  equally  applica- 
ble to  manufacturing  privileges.  The  reason  why  governments  are 
so  easily  entrapped  into  measures  of  this  kind  is,  partly  because  they 
see  a  statement  of  large  profits,  and  do  not  trouble  themselves  to  in- 
quire whence  they  are  derived ;  and  partly  because  this  apparent 
profit  is  easily  reduced  to  numerical  calculation,  no  matter  whether 
wrong  or  right,  correct  or  incorrect ;  whereas  the  loss  and  mischief 
resulting  to  the  nation  are  infinitely  subdivided  amongst  the  mem- 
bers of  the  community,  and  operate  after  all  in  a  very  indirect,  com- 
plex, and  general  way,  so  as  to  escape  and  defy  calculation.  Some 
writers  maintain  arithmetic  to  be  the  only  sure  guide  in  political 
economy ;  for  my  part,  I  see  so  many  detestable  systems  built  upon 
arithmetical  statements,  that  I  am  rather  inclined  to  regard  thai 
science  as  the  instrument  of  national  calamity. 

*  Taylor's  Letters  on  India 

f  Raynal.  Hist.  phil.  et  polit,  des  Eslabl.  des  Europeens,  dans  les  deux  Indes 
'.iv.  iv.  j  19. 

J  Siecle  de  Louis  XV. 


CHAP.  XVH.  ON  PRODUCTION.  189 

SECTION  IV. 
Of  regulations  affecting  the  Corn  Trade. 

IT  would  seem  that  the  general  principles,  which  govern  the  com- 
merce of  all  other  commodities,  should  be  equally  applicable  to  the 
commerce  of  grain.  But  grain,  or  whatever  else  may  happen  to  be 
the  staple  article  of  human  subsistence  to  any  people,  deserves  more 
particular  notice. 

It  i«  universally  found,  that  the  numbers  of  mankind  increase,  in 
proportion  to  the  supply  of  subsistence.  The  abundance  and  cheap- 
ness of  provisions  are  favourable  to  the  advance  of  population ;  their 
scarcity  is  productive  of  the  opposite  effect  ;*  but  neither  cause  ope- 
rates so  rapidly  as  the  annual  succession  of  crops.  The  crop  of  one 
year  may,  perhaps,  exceed  or  fall  short  of  the  usual  average,  by  as 
much  as  one-fifth  or  one-fourth  ;  but  a  country,  that,  like  France,  has 
thirty  millions  of  inhabitants  one  year,  cannot  have  thirty-six  mil- 
lions the  next ;  nor  could  its  population  be  reduced  to  twenty-four 
millions  in  the  space  of  one  year,  without  the  most  dreadful  degree 
of  suffering.  Therefore  it  is  the  law  of  nature,  that  the  population 
shall  one  year  be'  superabundantly  supplied  with  subsistence,  and 
another  year  be  subjected  to  scarcity  in  some  degree  or  other  of 
intensity. 

~.  And  so,  indeed,  it  is  with  all  other  objects  of  consumption ;  but, 
as  the  most  of  them  are  not  absolutely  indispensable  to  existence,  the 
temporary  privation  of  them  amounts  not  to  the  absolute  extinction 
of  life.  The  high  price  of  a  product,  which  has  wholly  or  partially 
failed  at  home,  is  a  powerful  stimulus  to  commerce  to  import  it  from 
a  greater  distance  and  at  a  greater  expense.  But  it  is  unsafe  to  leave 
wholly  to  the  providence  of  individuals  the  care  of  supplying  an 
article  of  such  absolute  necessity :  the  delay  of  which,  but  for  a  few 
days,  may  be  a  national  calamity  ;  the  transport  of  which  exceeds 
the  ordinary  means  of  commerce;  and  whose  weight  and  bulk 
would  make  its  distant  transport,  especially  by  land,  double  or  triple 
its  average  price.  If  the  foreign  supply  of  corn  be  relied  upon,  it 
may  happen  to  be  scarce  and  dear  in  the  exporting  and  importing 
country  at  the  same  moment.  The  government  of  the  exporting 
country  may  prohibit  the  export,  or  a  maritime  war  may  interrupt 
the  transport.  But  the  article  is  one  the  nation  cannot  do  without  ; 
or  even  wait  for  a  few  days  longer.  Delay  is  death  to  a  part  of  the 
population  at  least. 

For  the  purpose  of  equalizing  the  average  consumption  to  the 
average  crop,  each  family  ought  literally  to  lay  by,  in  years  of  plenty 
for  the  deficiency  of  years  of  scarcity.  But  such  providence  canno' 
be  reckoned  upon  in  the  bulk  of  the  population.  A  great  majority,  to 
say  nothing  of  their  utter  want  of  foresight,  are  destitute  of  the 
means  of  keeping  such  a  store  in  reserve  sometimes  several  vears 

*  Vide  infra.  Book  II.  chap.  11. 


190  ON  PRODUCTION.  BOOK  L 

together ;  neither  have  they  the  accommodations  for  housing  it,  or 
the  means  of  taking  it  along  with  them  on  a  casual  change  of  abode. 

Can  speculative  commerce  be  depended  upon  for  this  reserve 
against  a  deficiency  ?  At  first  sight  it  might  appear  that  it  could, 
that  self-interest  would  be  an  adequate  motive ;  for  the  difference  of 
the  price  of  corn  in  years  of  abundance  and  those  of  scarcity  is  very 
gieat.  But  the  recurrence  of  the  oscillation  is  too  irregular  in  dis- 
tance of  time,  and  too  infrequent  also,  to  give  rise  to  a  regular  traffic, 
01  one  that  can  be  repeated  at  pleasure.  The  purchase  of  the  grain, 
the  number  and  size  of  the  storehouses,  require  a  very  large  advance 
of  capital  and  a  heavy  arrear  of  interest:  it  is  an  article  that  must 
be  repeatedly  shifted  and  turned,  and  is  much  exposed  to  fraud  and 
damage,  as  well  as  to  popular  violence.  All  these  are  to  be  covered 
by  a  profit  of  rare  occurrence.  Wherefore,  it  is  possible,  that  the 
article  may  not  hold  out  sufficient  temptation  to  the  speculator, 
although  this  would  be  the  most  commendable  kind  of  speculation, 
being  framed  upon  the  principle  of  buying  from  the  producer  when 
he  is  eager  to  sell,  and  selling  to  the  consumer  wher^he  finds  it  diffi- 
cult to  purchase. 

In  default  of  the  individual  providence  of  the  consumer,  and  of 
speculative  accumulation  and  reserve,  neither  of  which  it  would  seem 
can  be  safely  depended  upon,  can  the  public  authority,  as  represent- 
ing the  aggregate  interest,  undertake  the  charge  of  providing  against 
a  scarcity  with  any  prospect  of  success  1  I  am  aware,  that,  in  a  few 
very  limited  communities,  blessed  with  a  very  economical  govern- 
ment, like  some  of  the  Swiss  cantons,  public  granaries  for  storing  a 
casual  surplus  have  answered  the  purpose  well  enough.  But  I  should 
pronounce  them  impracticable  in  large  and  populous  countries.  The 
advance  of  capital  and  its  accruing  interest  would  affect  the  govern- 
ment in  the  same  manner  as  private  speculators,  and  even  in  a 
gi eater  degree;  for  there  are  few  governments,  that  can  borrow  on 
such  low  terms  as  individuals  in  good  credit.  The  difficulties  of 
managing  a  commercial  concern,  of  buying,  storing,  and  re-selling 
to  so  large  an  extent,  would  be  still  more  insuperable.  Turgot,  in 
his  letters  on  the  commerce  of  grain,  has  clearly  proved,  that,  in 
matters  of  this  kind,  a  government  never  can  expect  to  be  served  at 
a  reasonable  rate ;  all  its  agents  having  an  interest  in  swelling  its 
expenditure,  and  none  of  them  in  curtailing.  It  would  be  utterly  im- 
possible to  answer  for  the  tolerable  conduct  of  a  business  left  to  the 
discretion  of  agents  without  any  adequate  control,  whose  actions  are, 
for  the  most  part,  governed  by  the  superior  dignitaries  of  the  state, 
who  seldom  have  either  the  knowledge  or  condescension  requisite 
for  such  details.  A  sudden  panic  in  the  public  authorities  might 
prematurely  empty  the  granaries ;  a  political  measure,  or  a  war, 
divert  their  contents  to  quite  a  different  destination. 

Generally  speaking,  it  appears  that  there  is  no  safe  dependence  for 
a  reserve  of  supply  against  a  season  of  scarcity,  unless  the  business 
be  confided  to  the  discretionary  management  of  mercantile  houses  of 
the  first  capital,  credit,  and  intelligence,  willing  to  undertake  the 


CHAP.  XVIL  ON  PRODUCTION. 


191 


purchase,  and  the  filling  and  replenishment  of  the  granaries  upon  cer- 
tain stipulated  terms,  and  with  the  prospect  of  such  advantages,  sa 
may  fairly  recompense  them  for  all  their  trouble.  The  operation 
would  then  be  safe  and  effectual,  for  the  contractors  would  give  secu- 
rity for  due  performance ;  and  it  would  also  be  cheaper  executed  in 
this  way  than  in  any  other.  Different  establishments  might  be  con- 
tracted vrith  for  the  different  cities  of  note ;  and  these  being  thus 
supplied  in  times  of  scarcity  from  the  stores  in  reserve,  would  no 
longer  drain  the  country  of  the  subsistence  destined  to  the  agricul- 
tural population,  (a) 

Public  stores  and  granaries  are  after  all  but  auxiliary  and  tempo- 
rary expedients  of  supply.  The  most  abundant  and  advantageous 
supply  will  always  be  that  furnished  by  the  utmost  freedom  of  com- 
merce, whose  duties  in  respect  to  grain  consist  chiefly  in  trans- 
porting the  produce  from  the  farmyard  to  the  principal  markets, 
and  thence  in  smaller  quantities  from  the  markets  of  the  districts 
where  it  is  superabundant  to  those  of  others  that  may  be  scantily 
supplied ;  or  in  exporting  when  cheap,  and  importing  when  dear. 

Popular  prejudice  and  ignorance  have  universally  regarded  with 
an  evil  eye  those  concerned  in  the  corn-trade  ;  nor  have  the  deposi- 
tories of  national  authority  been  always  exempt  from  similar  illibe- 
rality.  The  main  charge  against  them  is,  that  they  buy  up  corn  with 
the  express  purpose  of  raising  its  price,  or  at  least  of  making  an 
unreasonable  profit  upon  the  purchase  and  re-sale,  which  is  in  effect 
so  much  gratuitous  loss  to  the  producer  and  consumer. 

First,  I  would  ask,  what  is  meant  by  this  charge  1  If  it  be  meant 
to  accuse  the  dealers  of  buying  in  plentiful  seasons,  when  corn  is 
cheap,  and  laying  by  in  reserve  against  seasons  of  scarcity,  we  have 
just  seen  that  this  is  a  most  beneficial  operation,  and  the  sole  means 
of  accommodating  the  supply  of  so  precarious  an  article  to  the  regu- 
larity of  an  unceasing  demand.  Large  stores  of  grain  laid  in  at  a 
>ow  price  contribute  powerfully  to  place  the  subsistence  of  the  popu- 
lation beyond  risk  of  failure,  and  deserve  not  only  the  protection, 
but  the  encouragement  of  the  public  authorities.  But,  if  it  be  meant 
to  charge  the  corn-dealers  with  buying  up  on  a  rising  market  and 
on  the  approach  of  scarcity,  and  thereby  enhancing  the  scarcity  and 
the  price,  although  I  admit  that  this  operation  has  not  the  same 

(a)  It  is  singular,  that,  after  the  very  careful  revision  which  this  section  has 
undergone  in  the  last  edition,  this  paragraph  should  have  been  suffered  to  stand. 
Indeed,  one  would  almost  suspect  that  our  author  had  left  it  rather  in  compli- 
ment to  the  popular  notions  of  his  own  country,  than  from  personal  conviction  of 
the  propriety  of  the  measure  he  suggests ;  which  is  impugned  by  the  whole  con- 
text of  the  remaining  part  of  the  section.  The  best  security  against  famine  is, 
the  total  absence  of  all  official  interference  whatever,  whether  permanent  or 
temporary,  as  the  example  of  Great  Britain  will  testify.  There  the  government 
has  at  all  times  abstained  from  taking  a  personal  part  in  the  supply  either  of 
town  or  country,  and  has  limited  its  interference  to  the  mere  export  and  import, 
which  have  only  been  cramped  and  impeded  by  ill-advised  operations.  Another 
important  ground  of  security  is,  the  variety  of  the  national  food.  Upon  this  ou» 
author  has  observed. — Vide,  infra.  T. 


192  ON  PRODUCTION.  BOOK  I. 

recommendation  of  utility,  and  that  the  consumer  is  saddled  with 
the  additional  cost  of  the  operation  without  any  direct  equivalent 
benefit,  for  in  this  instance  the  deficiency  of  one  year  is  not  made 
good  by  the  hoarded  surplus  of  a  preceding  one ;  yet  I  cannot  think 
it  has  ever  been  attended  with  any  very  alarming  or  fatal  conse- 
quences. Corn  is  a  commodity  of  most  extended  production;  and 
its  price  cannot  be  arbitrarily  raised,  without  disarming  the  competi- 
tion of  an  infinity  of  sellers,  and  without  an  extent  of  dealing  and  of 
agency  scarcely  practicable  to  individuals.  It  is,  besides,  a  most 
cumbersome  and  inconvenient  article  in  comparison  with  its  price, 
and,  consequently,  most  expensive  and  troublesome  in  the  carriage 
and  warehousing.  A  store  of  any  considerable  value  can  not  escape 
observation.*  And  its  liability  to  damage  or  decay  often  makes  sales 
compulsory,  and  exposes  the  larger  speculators  to  immense  loss. 

Speculative  monopoly  is,  therefore,  extremely  difficult,  and  little 
to  be  dreaded.  The  kind  of  engrossment  most  prejudicial,  as  well 
as  most  difficult  of  prevention,  is  that  practised  by  the  domestic  pru- 
dence of  individuals  in  apprehension  of  a  scarcity.  Some,  from 
excess  of  precaution,  lay  by  rather  more  than  they  want;  while  farm- 
ers,  farming  proprietors,  millers,  and  bakers,  who  habitually  keep  a 
stock  on  hand,  take  care  somewhat  to  swell  that  stock,  in  the  idea 
that  they  shall  sell  to  a  profit  whatever  surplus  there  may  be ;  and 
the  infinite  number  of  these  petty  acts  of  engrossment  makes  them 
greatly  exceed,  in  the  aggregate,  all  the  united  efforts  of  speculation. 

But  what  if  it  should  turn  out,  after  all,  that  even  the  selfish  and 
odious  views  of  such  speculators  are  productive  of  some  good  ? 
When  corn  is  cheap,  it  is  consumed  with  less  providence  and  fru- 
gality, and  used  as  food  for  the  domestic  animals.  The  distant 
prospect  of  scarcity,  or  even  a  slight  rise  of  price,  is  insufficient  to 
check  this  improvidence  betimes.  If  the  great  holders  shut  up  their 
stores,  however,  the  consequent  anticipation  of  a  rise  of  price  imme- 
diately puts  the  public  on  their  guard,  and  awakens  the  particular 
frugality  and  care  of  the  little  consumers,  of  whom  the  great  mass 
of  consumption  is  composed.  Ingenuity  is  set  at  work  to  find  a  sub- 
stitute for  the  scarce  article  of  food,  and  not  a  particle  is  wasted. 
Thus,  the  avarice  of  one  part  of  mankind  operates  as  a  salutary 
check  upon  the  improvidence  of  the  rest;  and,  when  the  stock  with- 
held at  length  appears  in  the  market,  its  quantity  tends  to  lower  the 
price  in  favour  of  the  consumer. 

With  regard  to  the  tribute  which  the  dealer  is  supposed  to  exact 
from  both  producer  and  consumer,  it  is  a  charge  that  will  attach  with 
equal  justice  upon  every  branch  of  commerce  whatsoever.  There 
would  be  some  meaning  in  it,  could  products  reach  the  hnit'is  of  the 
consumer  without  any  advance  of  capital,  without  warehouses,  trou 

*  Lamm  re,  who  was  a  gre-it  advocate  for  the  interference  of  authority  in  these 
matters,  and  was  commissioned  by  the  government,  in  the  scarcities  of  the  years 
1699 — 1709,  todiscover  all  concealed  hoards,  and  bring  to  light  the  nxmnpoiists, 
frankly  confesses,  that  he  was  not  able  to  make  seizure  of  so  much  as  100  qnar 
tens  altogether, — Traite  de  la  Police,  Supplement  au  tome  11. 


CHAP.  XVIL  ON  PRODUCTION.  193 

ble,  combination,  or  any  kind  of  difficulty.  But,  so  long  as  difficul- 
ties shall  exist,  nobody  will  be  able  to  surmount  them  so  cheaply,  as 
those  who  make  it  their  special  business.  Legislation  should  take 
an  enlarged  view  of  commerce  in  the  aggregate,  small  and  great ; 
it  will  find  its  agents  busied  in  traversing  the  whole  surface  of  the 
territory,  watching  every  fluctuation  of  demand  and  supply,  adjusting 
the  casual  or  local  deficiency  of  price  to  meet  the  charges  of  pro- 
duction and  excess  of  price  above  the  capacity  of  consumption.  Is 
it  to  the  cultivator,  to  the  consumer,  or  to  the  public  administration 
that  we  can  safely  look  for  so  beneficial  and  powerful  an  agency  1 
Extend,  if  you  please,  the  facility  of  intercourse,  and  particularly 
the  capacities  of  internal  navigation,  which  alone  is  suited  to  the 
transport  of  a  commodity  so  cumbrous  and  bulky  as  grain;  vigilantly 
watch  over  the  personal  security  of  the  trader;  and  then  leave  him 
to  follow  his  own  track.  Commerce  cannot  make  good  the  failure 
of  the  crop;  but  it  can  distribute  whatever  there  may  be  to  distribute, 
in  the  manner  best  suited  to  the  wants  of  the  community,  as  well  as 
to  the  interests  of  production.  And  doubtless  it  was  for  this  reason 
that  Smith  pronounced  the  labour  of  the  corn  dealer  to  be  favourable 
to  the  production  of  corn,  in  the  next  degree  to  that  of  the  cultivator 
himself. 

The  prevalence  of  erroneous  views  of  the  production  and  com- 
merce of  articles  of  human  subsistence,  has  led  to  a  world  of  mis- 
chievous and  contradictory  laws,  regulations,  and  ordinances,  in  all 
countries,  suggested  by  the  exigency  of  the  moment,  and  often  ex- 
torted by  popular  importunity.  The  danger  and  odium  thus  heaped 
upon  the  dealers  in  grain  have  frequently  thrown  the  business  into 
the  hands  of  inferior  persons,  qualified  neither  by  information  nor 
ability  for  the  business ;  and  the  usual  consequence  has  followed  ; 
namely,  that  the  same  traffic  has  been  carried  on  in  secret,  at  far 
greater  expense  to  the  consumers;  the  dealers  tq  whom  it  was 
abandoned  being  of  course  obliged  to  pay  themselves  for  all  the  risk 
and  inconvenience  of  the  occupation. 

•  Whenever  a  maximum  of  price  has  been  affixed  to  grain,  it  has 
immediately  been  withdrawn  or  concealed.  The  next  step  was  to 
compel  the  farmers  to  bring  their  grain  to  market,  and  prohibit  the 
private  sales.  These  violations  of  property,  with  all  their  usual 
accompaniments  of  inquisitorial  search,  personal  violence,  and  in- 
justice, have  never  afforded  any  considerable  resource  to  the  govern- 
ment employing  them.  In  polity  as  well  as  morality,  the  grand 
secret  is,  not  to'constrain  the  actions,  but  to  awaken  the  inclinations 
of  mankind.  Markets  are  not  to  be  supplied  by  the  terror  of  the 
bayonet  or  the  sabre.* 

When  the  national  government  attempts  to  supply  the  population 

*  The  French  minister  of  the  interior,  in  his  report,  presented  in  December, 
1817,  admits  that  the  markets  were  never  so  ill  supplied  as  immediately  alter 
the  decree  of  May  4,  1812,  prohibiting  all  sales  out  of  open  market.  The  con- 
sumers crowded  thither,  having  nowhere  else  to  resort  to;  while  the  formers, 
beino-  obliged  to  sell  below  the  current  price,  pretended  to  have  nothing  for  sale. 
IT  Z 


194  ON  PRODUCTION.  BOOK  I 

by  becoming  itself  a  dealer,  it  is  sure  to  fail  in  satisfying  the  national 
wants  itself,  and  at  the  same  time  to  extinguish  all  the  resources  that 
freedom  of  commerce  would  offer;  for  nobody  else  will  knowingly 
embark  in  a  losing  trade,  though  the  government  may. 

During  the  scarcity  prevalent  throughout  many  parts  of  France, 
in  the  year  1775,  the  municipalities  of  Lyons  and  some  other  towns 
attempted  to  relieve  the  wants  of  the  inhabitants,  by  buying  up  corn 
in  the  country,  and  re-selling  it  at  a  loss  in  the  towns.  To  defray 
the  expense  of  this  operation,  they  at  the  same  time  obtained  an  in- 
crease of  the  octroi  or  tolls  upon  goods  entering  their  gates.  The 
scarcity  grew  worse  and  worse,  for  a  very  obvious  reason ;  the  ordi- 
nary dealers  naturally  abandoned  markets  where  goods  were  sold 
below  the  cost  price,  and  which  they  could  not  resort  to  without 
paying  extra  toll  upon  entry.* 

The  more  necessary  an  article  is,  the  more  dangerous  it  is  to 
reduce  its  price  below  the  natural  level.  An  accidental  dearness  of 
corn,  though  doubtless  a  most  unwelcome  occurrence,  is  commonly 
brought  about  by  causes  out  of  all  human  power  to  remove.f  There 
is  no  wisdom  in  heaping  one  calamity  upon  another,  and  passing 
bad  laws  because  there  has  been  a  bad  season. 

Governments  have  met  with  no  better  success  in  the  matter  of 
importation,  than  in  the  conduct  of  internal  commerce.  The  enor- 
mous sacrifices  made  by  the  commune  of  Paris  and  the  general 
government,  to  provision  the  metropolis  in  the  winter  of  1816-17 
with  grain  imported  from  abroad,  did  not  protect  the  consumer  from 
an  exorbitant  advance  in  the  price  of  bread,  which  was  besides  de- 
ficient both  in  weight  and  quality ;  and  the  supply  was  found  inade- 
quate after  all.J 

*  In  all  ages  and  in  all  places  this  effect  will  follow.  The  Emperor  Julian, 
A.  D.  362,  caused  to  be  sold  at  Antioch  420,000  modii  of  wheat  imported  from 
Chalsis  and  Egypt  for  the  purpose,  at  a  price  lower  than  the  average  of  the 
market;  the  supplies  of  private  commerce  were  immediately  stopped  in  conse- 
quence, and  the  famine  was  aggravated.  Vide  Gibbon,  c.  24.  The  principles  of 
political  economy  are  eternal  and  immutable ;  but  one  nation  is  acquainted  with 
them,  and  another  not. 

The  metropolis  of  the  Roman  empire  was  always  destitute  of  subsistence, 
when  .the  government  withheld  the  gratuitous  largesses  of  grain  drawn  from  a 
tributary  world;  and  these  very  largesses  were  the  real  cause  of  the  scarcity 
felt  and  complained  of. 

f  One  of  the  most  frequent  causes  of  famine  is,  indeed,  of  human  creation, 
and  that  is  "war,  which  both  interrupts  production,  and  wastes  existing  products. 
This  cause  is,  therefore,  within  human  control ;  but  we  can  hardly  expect  it  to 
be  effectually  exerted,  until  governments  shall  entertain  more  accurate  notions 
of  their  own,  as  well  as  of  the  national  interests ;  and  nations  be  weaned  of  the 
puerility  of  attaching  sentiments  of  admiration  and  glory  to  perils  encountered 
without  necessity  or  reason. 

J  It  is  mere  mockery  to  talk  of  the  paternal  care,  solicitude,  or  beneficence 
of  government,  which  are  never  of  any  avail,  either  to  extend  the  powers  of 
authority,  or  to  diminish  the  suffering  of  the  people.  The  solicitude  of  the 
government  can  never  be  doubted ;  a  sense  of  intense  personal  interest  will 
Jilways  guide  it  to  the  conservation  of  social  order,  by  which  it  is  sure  to  be  the 
principal  gainer.  And  its  beneficence  ran  have  little  merit ;  for  it  can  exert 
none,  but  at  the  expense  of  its  subjects. 


CHAP.  XVII.  ON  PRODUCTION.  195 

On  the  subject  of  bounties  on  import,  it  is  hardly  necessary  to 
touch.  The  most  effectual  bounty  is  the  high  price  of  the  article  in 
the  country  where  the  scarcity  occurs,  amounting  sometimes  to  as 
much  as  200  or  300  per  cent.  If  this  be  not  sufficient  to  tempt  the 
importer,  I  know  of  no  adequate  inducement  that  the  government 
could  hold  out  to  him.  * 

Nations  would  be  less  subject  to  famine,  were  they  to  employ  a 
greater  variety  of  aliments.  When  the  whole  population  depends 
upon  a  single  product  for  subsistence,  the  misery  of  a  scarcity  is 
extreme.  A  deficiency  of  corn  in  France  is  as  bad  as  one  of  rice  in 
Hindostan.  When  their  diet  consists  of  many  articles,  as  butcher's 
meat,  poultry,  esculent  roots,  vegetables,  fruits,  fish,  &c.,  according 
to  local  circumstances,  the  supply  is  less  precarious ;  for  these  arti- 
cles seldom  fail  all  at  a  time.* 

Scarcity  would  also  be  of  less  frequent  occurrence,  if  more  atten- 
tion were  paid  to  the  dissemination  and  perfection  of  the  art  of 
preserving,  at  a  cheap  rate,  such  kinds  of  food,  as  are  offered  in 
superabundance  at  particular  seasons  and  places ;  fish,  for  instance ; 
their  periodical  excess  might  in  this  way  be  made  to  serve  for  times 
of  scarcity.  A  perfect  freedom  of  international  maritime  intercourse 
would  enable  the  inhabitants  of  the  temperate  latitudes  to  partake 
cheaply  of  those  productions,  that  nature  pours  forth  in  such  pro- 
fusion under  a  tropical  sun.f  I  know  not  how  far  it  would  be  possi- 
ble to  preserve  and  transport  the  fruit  of  the  banana ;  but  the  expe- 

*  Custom,  the  tyrant  of  weak  minds,  and  of  such,  unfortunately,  is  the  great 
mass  of  mankind,  and  of  the  lower  classes  in  particular,  is  always  a  formidable 
opponent  to  the  introduction  of  a  new  article  of  food.  I  have  observed  in  some 
provinces  of  France,  a  decided  distaste  for  the  paste  prepared  in  the  Italian 
method,  although  a  most  nutritious  substance,  and  well  calculated  for  keeping  the 
flour  sound  and  good.  Probably,  nothing  but  the  frequent  recurrence  of  scarcity 
during  the  political  agitations  of  the  nation  could  have  extended  the  cultivation 
and  consumption  of  the  potatoe,  so  as  to  have  made  it  a  staple  article  of  food  in 
many  districts.  The  appetite  for  that  vegetable  would  be  still  more  general, 
were  a  little  more  attention  bestowed  upon  preserving  and  ameliorating  the 
species,  and  the  practice  of  raising  it  from  the  seed  rather  than  the  root  more 
strictly  observed. 

f  Humboldt  tells  us,  in  his  Essai  pol.  sur  la  Nouvelle  Espagne,  c.  ix.  that  an 
equal  area  of  land  in  that  country  will  produce  bananas,  potatoes,  and  wheat,  in 
the  following  proportions  of  weight : — 

Kilogrammes. 

Bananas 106,000 

Potatoes 2,400 

Wheat *    -      800 

The  product  of  bananas  is,  therefore,  in  weight,  133  times  that  of  wheat,  and 
44  times  that  of  potatoes.  But  a  large  deduction  must  be  made  for  the  aqueous 
particles  of  the  banana. 

A  demi-hectare  of  fertile  land  in  Mexico,  by  proper  cultivation  of  the  larger 
species  of  banana,  may  be  made  to  feed  more  than  50  individuals ;  whereas  the  • 
same  extent  of  surface  in  Europe,  supposing  it  to  yield  eight-fold,  will  give  an 
annual' product  of  no  more  than  576  kils.  of  wheat  flour,  which  is  not  enough  for 
the  sustenance  of  two  persons.  It  is  natural  that  Europeans,  on  their  first  arrival 
in  a  tropical  region,  should  be  surprised  at  the  very  limited  extent  of  cultivated 
ground,  encircling  the  crowded  cabins  of  the  native  population. 


196  ON  PRODUCTION.  BOOK  L 

nment  has  in  a  great  measure  succeeded  with  respect  to  the  sugar- 
cane, which  furnishes,  in  a  thousand  shapes,  an  agreeable  and 
wholesome  article  of  diet,  and  is  produced  so  abundantly  by  all  parts 
of  the  world,  lying  within  38°  of  latitude,  that,  but  for  our  present 
absurd  legislative  provisions,  it  might  be  had  much  cheaper  than 
butcher's  meat,  and  for  the  same  price  as  many  indigenous  fruits 
and  vegetables.* 

To  return  to  the  corn-trade,  I  must  protest  against  the  indiscrimi- 
nate and  universal  application  of  the  arguments  I  have  adduced  to 
show  the  benefits  of  liberty.  Nothing  is  more  dangerous  in  prac- 
tice, than  an  obstinate,  unbending  adherence  to  system,  particularly 
in  its  application  to  the  wants  and  errors  of  mankind.  The  wiser 
course  is,  to  approximate  invariably  to  the  standard  of  sound  and 
acknowledged  principles,  to  lead  towards  them  by  the  never-failing 
influence  of  gradual  and  insensible  attraction.  It  is  well  to  fix 
beforehand  a  maximum  of  price  beyond  which  exportation  of  grain 
shall  either  be  prohibited,  or  subjected  to  heavy  duties ;  for,  as  smug- 
gling cannot  be  prevented  entirely,  it  is  better  that  those  who  are 
resolved  to  practise  it  should  pay  the  insurance  of  the  risk  to  the 
state  than  to  individuals. 

We  have  hitherto  regarded  the  inflated  price  of  grain  as  the  only 
evil  to  be  apprehended.  But  England,  in  1815,  was  alarmed  by  a 
prospect  of  an  opposite  evil ;  viz.  that  its  price  would  be  reduced  too 
low  by  the  influx  of  foreign  grain.  The  production  of  this  article 
is,  like  that  of  every  other,  much  more  costly  in  England  than  in  the 
neighbouring  states,  owing  to  a  variety  of  causes,  which  it  is  im- 
material here  to  explain ;  amongst  others,  chiefly  to  the  exorbitance 
of  her  taxation.  Foreign  grain  could  be  sold  in  England  at  two- 
thirds  of  its  cost  price  to  the  English  grower.  It,  therefore,  became 
a  most  important  question,  whether  it  were  better  to  permit  the  free 
importation,  and  thus,  by  exposing  the  home  producer  to  a  ruinous 
competition  with  the  foreign  grower,  to  render  him  incapable  of 
paying  his  rent  and  taxes,  to  divert  him  from  the  cultivation  of 
wheat  altogether,  and  place  England  in  a  state  of  dependence  for 
subsistence  upon  foreign,^  perhaps  hostile  nations ;  or,  by  excluding 
foreign  grain  from  her  market,  to  give  a  monopoly  to  the  home  pro- 
ducer, at  the  expense  of  the  consumer,  thereby  augmenting  the  diffi- 
culty of  subsistence  to  the  labouring  classes,  and,  by  the  advanced 
price  of  the  necessaries  of  life,  indirectly  raising  that  of  all  the 
manufactured  produce  of  the  country,  and  proportionately  disabling 
it  to  sustain  the  competition  of  other  nations. 

This  great  question  has  given  rise  to  the  most  animated  contest 
both  of  the  tongue  and  the  pen ;  and  the  obstinate  contention  of  two 
parties,  each  of  which  had  much  of  justice  on  its  side,  leaves  the  by- 

*  The  same  author  informs  us,  that,  in  St.  Domingo,  a  superficial  square  of 
'5403  toises,  is  reckoned  at  an  average  capable  of  producing  10,000  Ibs.  weiglii 
of  sugar;  and  that  the  total  consumption  of  that  commodity  in  France,  taking 
it  at  the  fair  average  of  20,000.000  kils.  might  be  raised  upon  a  superficial  area 
of  seven  square  leagues. 


CHAP.  XVII.  'ON  PRODUCTION.  197 

standers  to  infer,  that  neither  has  chosen  to  notice  the  grand  cau?e 
of  mischief;  that  is  to  say,  the  necessity  of  supporting  the  arrogant 
pretensions  of  England  to  universal  influence  and  dominion,  by  sacri- 
fices out  of  all  proportion  to  her  territorial  extent.  At  all  events, 
the  great  acuteness  and  intelligence,  displayed  by  the  combatants  on 
either  side,  have  thrown  new  light  upon  the  interference  of  authority 
in  the  business  of  the  supply  of  grain,  and  have  tended  to  strengthen 
the  conclusion  in  favour  of  commercial  liberty. 

The  substance  of  the  argument  of  the  prohibitionists  may  be  re- 
duced to  this ;  that  it  is  expedient  to  encourage  domestic  agriculture, 
even  at  the  expense  of  the  consumer,  to  avoid  the  risk  of  starvation 
by  external  means ;  which  is  seriously  to  be  apprehended  on  two 
occasions  in  particular ;  first,  when  the  power  or  influence  of  a  bel- 
ligerent is  able  to  intercept  or  check  the  import,  which  might  become 
necessary ;  secondly,  when  the  corn-growing  countries  themselves 
experience  a  scarcity,  and  are  obliged  to  retain  the  whole  of  their 
crops  for  their  own  subsistence.* 

It  was  replied  by  the  partisans  of  free-trade,  that  if  England  were 
to  become  a  regular  and  constant  importer  of  grain,  not  one,  but 
many  foreign  countries  would  grow  into  a  habit  of  supplying  her : 
the  raising  of  corn  for  her  market  in  Poland,  Spain,  Barbary,  and 
North  America,  would  be  more  extensively  practised,  and  the  sale  of 
their  produce  would  become  equally  indispensable  to  them,  as  the 
purchase  would  be  to  England :  that  even  Bonaparte,  the  most  bitter 
enemy  England  had  ever  encountered,  had  taken  her  money  for  the 
license  to  export  corn:  that  crops  never  fail  at  the  same  time  all  over 
the  world ;  and  that  an  extensive  commerce  of  grain  would  lead  to 
the  formation  of  large  stores  and  depots,  which  will  offer  the  best 
possible  security  against  the  recurrence  of  scarcity ;  and  that,  accord- 
ingly, as  they  asserted,  there  are  no  countries  less  subject  to  that 
calamity,  or  even  to  violent  fluctuations  of  price,  than  those  that 
grow  no  corn  at  all ;  for  which  they  cited  the  example  of  Holland 
and  other  nations  similarly  circumstanced-! 

However,  it  cannot  be  disputed  that,  even  in  countries  best  able 
to  reckon  on  commercial  supply,  there  are  many  serious  inconve- 
niences to  be  apprehended  from  the  ruin  of  internal  tillage.  Sub- 
sistence is  the  primary  want  of  a  nation,  and  it  is  neither  prudent 
nor  safe  to  become  dependent  upon  distant  supply.  Admitting  that 
laws,  which,  for  the  protection  of  the  agricultural  prohibit  the  im- 
port of  grain  to  the  prejudice  of  the  manufacturing  interest,  are  both 
unjust  and  impolitic,  it  should  be  recollected  that,  on  the  other  hand, 
excessive  taxation,  loans,  overgrown  establishments,  civil,  militaiy, 
or  diplomatic,  are  equally  impolitic  and  unjust,  and  fall  more  heavily 
upon  agriculture  than  upon  manufacture.  Perhaps  one  abuse  may 
make  another  necessary,  to  restore  the  equilibrium  of  production, 

*  Mai  thus. — Inquiry  into  the  Nature  and  Progress  of  Rent.   Grounds  of  an 
Opinion,  &c.  <m  Foreign  Corn. 
f  Ricardo.—  Essay  on  the  Influence  of  the  Low  Price  of  Corn  &c. 

17* 


198  ON  PRODUCTION.  BOOK  L 

otherwise  industry  would  abandon  one  branch,  and  take  exclusively 
to  another,  to  the  evident  peril  of  the  existence  of  society.  (1) 

(1)  The  question  of  a  free  trade  in  corn  is  itself  of  such  magnitude  and  im- 
portance, that  it  would  not'be  practicable  to  discuss  it  within  the  compass  of  a 
note.  As  our  author,  however,  has  in  this  paragraph  intimated  at  least  doubts  of 
the  superior  advantages  of  entire  freedom  in  the  trade  in  grain,  and  even  speaks 
of  the  "  many  serious  inconveniences  to  be  apprehended  from  the  ruin  of  internal 
tillage,"  and  deems  it  "  neither  prudent  nor  safe  to  become  dependent  upon  dis- 
tant supply,"  it  would  not  be  proper  to  withhold  from  the  reader  some  notice  of 
the  labours  of  the  more  recent  political  economists  and  practical  inquirers,  who 
have  poured  a  flood  of  light  over  this  whole  inquiry,  and  satisfactorily  demon- 
strated the  entire  inexpediency,  as  well  as  injustice,  of  restrictions  and  prohi- 
bitions on  the  importation  of  foreign  corn. 

The  first  work  to  which  we  refer,  is  the  "  Essay  on  the  External  Corn  Trade, 
by  R.  Torrens,  Esq.  M.  P.  F.  R.  S.,  fourth  edition,  London,  1827."  It  is  entitled 
to  distinguished  notice,  as  a  profound  and  masterly  investigation  of  the  principles 
relating  to  the  trade  in  grain,  and  explains  the  manner  in  which  restrictive  and 
prohibitive  laws  on  this  subject  have  contributed  to  create  revulsions  and  embar- 
rassments, from  which  England  has  experienced  so  much  suffering  in  her  com- 
merce and  manufactures.  The  doctrines  unfolded  by  Colonel  Torrens,  in  relation 
to  the  foreign  trade  in  corn,  have  been  sanctioned  and  confirmed  by  the  authority 
of  all  the  principal  writers  on  political  economy,  who  have  of  late  directed  their 
attention  to  the  same  important  topic.  He  condemns  these  laws  as  unwise,  unjust, 
and  wholly  inexpedient. 

Next  in  order  we  name  Mr.  James  Mill,  the  author  of  the  "  Elements  of 
Political  Economy,"  and  the  "  History  of  British  India."  In  a  pamphlet,  which 
he  published  in  London,  in  1823,  entitled  an  "Essay  on  the  Impolicy  of  a  Bounty 
on  the  Exportation  of  Grain,  and  on  the  Principles  which  ought  to  regulate  the 
Commerce  of  Grain,"  he  has  given  a  most  able  examination  of  these  questions. 
He  notices  most  of  the  arguments  urged  in  favour  of  restrictions  and  prohibitions 
in  the  corn  trade,  and  successfully  combats  them.  He,  moreover,  presents  many 
new  and  luminous  views,  and  discusses  the  whole  subject  with  a  fairness  and 
candour  that  cannot  fail  to  produce  conviction  in  any  unprejudiced  mind. 

Among  the  numerous  works,  to  which  this  important  subject  has  given  birth  in 
England,  none  has  awakened  more  attention,  or  had  a  more  extensive  circulation 
than  the  "  Catechism  on  the  Corn  Laws,  by  T.  Perronet  Thompson,  of  Q.ueen'3 
College,  Cambridge."  "It  was  first  published  in  1827,  and  we  believe  has  now 
passed  through  ten  editions.  The  author  has  given  a  candid  and  complete  exhi- 
bition of  the  fallacies  that,  from  time  to  time,  have  been  advanced  by  any  writer 
or  journalist  of  celebrity  in  support  of  the  English  corn  laws,  and  has  annexed 
to  them  respectively  the  most  triumphant  and  conclusive  answers.  No  point  at 
issue  in  the  controversy  has  been  left  untouched,  and  every  objection  to  the  free- 
dom of  trade  in  grain,  we  think,  removed. 

We  must  not  omit  to  mention  the  "  Address  to  the  Landowners  of  England 
on  the  Corn  Laws,  by  Viscount  Milton,  (now  Earl  Fitzwilliam,)  published  in 
London  in  1832."  This  is  an  appeal  by  Lord  Fitzwilliam  to  his  fellow  proprie- 
tors, for  he  is  said  to  be  one  of  the  largest  landowners  in  England,  against  the 
course  they  are  pursuing  on  this  great  question,  and  beseeching  them,  by  every 
consideration  of  their  country's  peace  and  welfare,  to  consent  to  the  abolition  of 
what  he  s»  satisfactorily  proves  to  be  a  vicious  system.  Passing  over  the  anti- 
commercial  tharacter  of  the  corn  laws  and  their  effects  upon  the  expenses  of 
government,  he  confines  himself  to  exposing  the  pernicious  consequences  which 
a  high  price  of  corn  produces  upon  the  population  at  large,  and  upon  the  opera- 
tions of  industrious  capitalists,  abridging  the  comforts  of  the  former,  frustrating 
the  exertions  of  the  latter,  and  not  even  promoting  the  welfare  of  the  agricultur- 
ists themselves.  The  impartial  review  this  author  has  taken  of  the  controversy, 
the  careful  manner  in  which  he  has  sifted  the  arguments  on  either  side,  and  the 


CHAP.  XVIIL  ON  PRODUCTION.  199 

CHAPTER  XVIIL 

OP  THE  EFFECT  UPON  NATIONAL  WEALTH,  RESULTING  FKOM  THE  PBODUCTIVJ3 
EFFORTS  OF  PUBLIC  AUTHORITY. 

THERE  can  be  no  production  of  new  value,  consequently  no  in- 
crease of  wealth,  where  the  product  of  a  productive  concern  does 
not  exceed  the  cost  of  production.*  Thus,  whether  government  or 
individuals  be  the  adventurers  in  the  losing  concern,  it  is  equally 
ruinous  to  the  nation,  and  there  is  so  much  less  value  in  the  country. 

It  is  of  no  avail  to  pretend,  that,  although  the  government  be  a 
loser,  its  agents,  the  industrious  people,  or  the  workmen  it  employs, 
have  made  a  profit.  If  the  concern  cannet  support  itself  and  pay  its 
own  way,  the  receipt  must  fall  short  of  the  outlay,  and  the  difference 
fall  upon  those,  who  supply  the  expenditure  of  the  state ;  that  is  to 
say,  the  tax-payers.f 

*  It  must  not  be  forgotten,  that  the  consumption  of  the  value  of  the  productive 
agency,  exerted  in  the  course  of  production,  is  quite  as  real  as  that  of  the  raw 
material.  And  under  this  term,  productive  agdncy,  I  comprise  that  of  capital  as 
well  as  of  human  beings. 

f  This  is  equally  true,  when  the  government  speculates  with  its  own  private 
9r  peculiar  funds,  as  with  the  produce  of  the  national  lands ;  for  whatever  is  thus 
expended  might  have  gone  towards  alleviating  the  public  burthens. 

known  bias  of  the  order  to  which  he  belongs  in  favour  of  the  corn  laws,  must 
convince  every  dispassionate  and  honest  inquirer,  that  the  same  process  which 
changed  his  opinions  must  change  theirs.  Years  may  elapse  in  England,  from 
the  undue  influence  of  the  landed  aristocracy  in  legislation,  before  these  restric- 
tive laws  can  be  repealed ;  but  the  force  of  truth  is  too  great  to  be  resisted  very 
long,  and  must  ultimately  prevail. 

The  last  writer  we  shall  refer  to  is  William  Jacobs,  Esquire,  F.  R.'S.,  the 
author  of  the  "  Tracts  relating  to  the  Corn  Trade  and  Corn  Laws :  including  the 
Second  Report  ordered  to  be  printed  by  the  two  Houses  of  Parliament,"  publi^h- 
ed  in  London,  in  1828.  Mr.  Jacobs  has  peculiar  claims  to  the  reader's  attention 
on  this  subject.  He  has  been  for  many  years  devoted  to  the  examination  of  the 
corn  trade,  is  the  Comptroller  of  Corn  Returns,  and,  from  his  great  knowledge 
and  experience,  was  selected  by  the  English  Board  of  Trade  to  proceed  to  the 
continent,  and  there  carefully  examine  the  actual  condition  of  the  agriculture 
and  trade  in  corn  of  the  principal  grain-growing  countries  in  the  North  of  Europe. 
This  work  contains  the  results  of  his  observations  and  laborious  researches,  and 
is  entirely  a  practical  view  of  the  past  and  present  state  of  the  trade  in  corn, 
supported  by  a  variety  of  curious  and  entirely  authentic  documents.  In  thia 
place  it  would  be  impracticable  to  give  any  detailed  account  of  its  great  merits 
as  a  statistical  view  of  the  subject ;  and  this  is  not  its  only  excellence.  From 
the  comprehensive  and  careful  survey  the  author  took  of  the  actual  condition  of 
agriculture  and  trade  in  corn,  in  Europe,  he  became  thoroughly  satisfied  of  the 
inexpediency  of  the  corn  laws,  and  declares  it  to  be  his  deliberate  conviction 
that  the  fair  and  honest  trade  of  speculation  in  corn  should  be  by  Jaw  restored, 
as  the  only  means  by  which  the  due  price  between  the  producer  and  consumer 
can  be  equitably  adjusted ;  and  he  adds,  that  the  destruction  of  this  trade  has 
been  the  chief  cause  of  the  depression  of  the  agricultural  proprietors  both  in 
England  and  on  the  continent  of  Europe. 

AMERICAN  EDITOF. 


200  ON  PRODUCTION.  BOOK  I. 

The  manufacture  of  Gobelin  tapestry,  carried  on  by  the  govern- 
ment of  France,  consumes  a  large  quantity  of  wool,  silk,  and  dyeing- 
diugs;  furthermore,  it  consumes  the  rent  of  the  ground  and  build- 
ings, as  well  as  the  wages  of  workmen  employed ;  all  which  should 
be  reimbursed  by  the  product,  which  they  are  very  far  from  being. 
This  establishment,  instead  of  a  source  of  wealth  to  the  nation  at 
large,  for  the  government  is  fully  aware  of  the  loss  to  itself,  is,  on 
the  contrary,  a  source  of  perpetual  impoverishment.  The  annual 
loss  to  the  nation  is  the  whole  excess  of  the  annual  consumption  of 
the  concern,  including  wages,  which  are  one  item  of  consumption, 
above  the  annual  product.  The  same  may  be  said  of  the  manufac- 
ture of  porcelain  at  Sevres,  and  I  fear  of  all  manufacturing  concerns 
carried  on  upon  account  of  governments. 

We  are  told,  that  this  is  a  necessary  sacrifice ;  that  otherwise  the 
sovereign  would  be  unprovided  with  objects  of  royal  bounty  and  of 
royal  splendour.  This  is  no  place  to  inquire  how  far  the  munificence 
of  the  monarch  and  the  splendour  of  his  palaces  contribute  to  the 
good  government  of  the  people.  I  take  for  granted  that  these  things 
are  necessary ;  yet,  admitting  them  to  be  so,  there  is  no  reason  why 
the  national  sacrifices,  requisite  to  support  this  magnificence  and 
liberality,  should  be  aggravated  by  the  losses  incurred  by  a  mis- 
direction of  the  public  means.  A  nation  had  much  better  buy  out- 
right what  it  thinks  proper  to  bestow ;  it  would  probably  obtain  for 
less  money  an  obiect  full  as  precious ;  for  individuals  can  always 
undersell  the  government.* 

There  is  a  further  evil  attending  the  productive  efforts  of  the 
government;  they  counteract  the  individual  industry,  not  of  those  it 
deals  with,  for  they  take  good  care  to  be  no  losers,  but  of  its  com- 
petitors in  production.  The  state  is  too  formidable  a  rival  in  agri- 
culture, manufacture,  and  commerce;  it  has  too  much  wealth  and 
power  at  command,  and  too  little  care  of  its  own  interest.  It  can 
submit  to  the  loss  of  selling  below  prime  cost ;  it  can  consume,  pro- 
duce, or  monopolize  in  very  little  time  so  large  a  quantity  of  pro- 
ducts, as  violently  to  derange  the  relative  prices  of  commodities :  and 
every  violent  fluctuation  of  price  is  calamitous.  The  producer  calcu- 
lates upon  the  probable  value  of  his  product  when  ready  for  market; 
nothing  discourages  him  so  much,  as  a  fluctuation  that  defies  all 
calculation.  The  loss  he  suffers  is  equally  unmerited,  as  the  acci- 
dental gains  that  may  be  thrown  into  his  hands.  His  unmerited  gains, 
if  any  there  be,  are  so  much  extra  charge  upon  the  consumer. 

There  are  some  concerns,  I  know,  which  the  government  must  of 
necessity  keep  in  its  own  hands.  The  building  of  ships  of  war  can- 

*  The  same  may  be  observed  of  commercial  enterprises  undertaken  by  the 
public  authority.  During  the  scarcity  of  1816-17,  the  French  government  bought 
np  corn  in  foieign  markets;  the  price  of  corn  rose  to  an  exorbitant  rate  in  the 
home  market,  and  the  government  resold  at  a  very  high  rate,  although  somewhat 
below  the  average  of  the  market.  Individual  traders  would  have  found  this  a 

Tery  profitable  venture ;  but  the  government  was  out  of  pocket  21  millions  of 

franr,s  and  upwards. — Rapport  au  Roi  du  24  Dec.  1818. 


CHAP.  XVIII.  ON  PRODUCTION. 


201 


not  safely  be  left  to  individuals;  nor,  perhaps,  the  manufacture  of 
gunpowder.  However,  in  France,  cannon,  muskets,  caissons,  and 
tumbrils  are  bought  of  private  makers,  and  seemingly  with  benefit. 
Perhaps  the  same  system  might  be  further  extended.  A  government 
must  act  by  deputy,  by  the  intermediate  agency  of  a  set  of  people, 
whose  interest  is  in  direct  opposition  to  its  own ;  and  they  will  of 
course  attend  to  their  own  in  preference.  If  it  be  so  circumstanced 
as  to  be  invariably  cheated  in  its  bargains,  there  is  no  need  to  mul- 
tiply the  opportunities  of  fraud,  by  engaging  itself  in  production  and 
adventure ;  that  is  to  say,  embarking  in  concerns,  that  must  infinitely 
multiply  the  occasions  of  bargaining  with  individuals. 

But,  although  the  public  can  scarcely  be  itself  a  successful  pro- 
ducer ;  it  can  at  any  rate  give  a  powerful  stimulus  to  individual  pro- 
ductive energy,  by  well-planned,  well-conducted,  and  well-supported 
public  works,  particularly  roads,  canals,  and  harbours. 

Facility  of  communication  assists  production,  exactly  in  the  same 
way  as  the  machinery,  that  multiplies  manufactured  products,  and 
abridges  the  labour  of  production.  It  is  a  means  of  furnishing  the 
same  product  at  less  expense,  which  has  exactly  the  same  effect,  as 
raising  a  greater  product  with  the  same  expense.  If  we  take  into 
account  the  immense  quantity  of  goods  conveyed  upon  the  roade  of 
a  rich  and  populous  empire,  from  the  commonest  vegetables  brought 
daily  to  market,  up  to  the  rarest  imported  luxuries  poured  into  its 
harbours  from  every  part  of  the  globe,  and  thence  diffused,  by  means 
of  land-carriage,  over  the  whole  face  of  the  territory,  we  shall  readily 
perceive  the  inestimable  economy  of  good  roads  in  the  charges  of 
production.  The  saving  in  carriage  amounts  to  the  whole  value  the 
article  has  derived  gratuitously  from  nature,  if,  without  good  roads, 
it  could  not  be  had  at  all.  Were  it  possible  to  transplant  from  the 
mountain  to  the  plain  the  beautiful  forests  that  flourish  and  rot 
neglected  upon  the  inaccessible  sides  of  the  Alps  and  Pyrenees,  the 
value  of  these  forests  would  be  an  entirely  new  creation  of  value  to 
mankind,  a  clear  gain  of  revenue  both  to  the  landholder  tind  the 
consumer  also. 

Academies,  libraries,  public  schools,  and  museums,  founded  by 
enlightened  governments,  contribute  to  the  creation  of  wealth,  by 
the  further  discovery  of  truth,  and  the  diffusion  of  what  was  known 
before ;  thus  empowering  the  superior  agents  and  directors  of  pro- 
duction, to  extend  the  application  of  human  science  to  the  supply  of 
human  wants.*  So  likewise  of  travels,  or  voyages  of  discovery, 
undertaken  at  the  public  charge ;  the  consequences  of  which  have  of 
late  years  been  rendered  particularly  brilliant,  by  the  extraordinary 
merit  of  those  \vho  have  devoted  themselves  to  such  pursuits. 

It  is  observable,  too,  that  the  sacrifices  made  for  the  enlargement 
of  human  knowledge,  or  merely  for  its  conservation,  should  not  be 
reprobated,  though  directed  to  objects  of  no  immediate  or  apparent 
utility.  The  sciences  have  an  universal  chain  of  connexion.  One 

*  Supra,  Chap.  6. 
2A 


202  ON  PRODUCTION.  BOOK  1. 

which  seems  purely  speculative  must  advance  a  step,  before  another 
of  great  and  obvious  practical  utility  can  be  promoted.  Besides,  it  is 
impossible  to  say  what  useful  properties  may  lie  dormant  in  an  object 
of  mere  curiosity.  When  the  Dutchman,  Otto  Guericke,  struck  out 
the  first  sparks  of  electricity,  who  would  have  supposed  they  would 
iiave  enabled  Franklin  to  direct  the  lightning,  and  divert  it  from  our 
edifices ;  an  exploit  apparently  so  far  beyond  the  powers  of  man  1 

But  of  all  the  means,  by  which  a  government  can  stimulate  pro- 
duction, there  is  none  so  powerful  as  the  perfect  security  of  person 
and  property,  especially  from  the  aggressions  of  arbitrary  power.* 
This  security  is  of  itself  a  source  of  public  prosperity,  that  more  than 
countera'cts  all  the  restrictions  hitherto  invented  for  checking  its 
progress.  Restrictions  compress  the  elasticity  of  production ;  but 
want  of  security  destroys  it  altogether,  (a)  To  convince  ourselves 
of  this  fact,  it  is  sufficient  to  compare  the  nations  of  western  Europe 
with  those  subject  to  the  Ottoman  power.  Look  at  most  parts  of 
Africa,  Arabia,  Persia,  and  Asia  Minor,  once  so  thickly  strown  with 
flourishing  cities,  whereof,  as  Montesquieu  remarks,  no  trace  now 
remains  but  in  the  pages  of  Strabo.  The  inhabitants  are  pillaged 
alike  by  bandits  and  pachas;  wealth  and  population  have  vanished; 
and  the  thinly  scattered  remnant  are  miserable  objects  of  want  and 
wretchedness.  Survey  Europe  on  the  other  hand ;  and,  though  she 
is  still  far  short  of  the  prosperity  she  might  attain,  most  of  her  king- 
doms are  in  a  thriving  condition,  in  spite  of  taxes  and  restrictions 
innumerable ;  for  the  simple  reason,  that  persons  and  property  are 
there  pretty  generally  safe  from  violence  and  arbitrary  exaction. 

There  is  one  expedient  by  which  a  government  may  give  its  sub- 
jects a  momentary  accession  of  wealth,  that  I  have  hitherto  omitted 
to  mention.  I  mean  the  robbery  from  another  nation  of  all  its 
moveable  property,  and  bringing  home  the  spoil,  or  the  imposition 
of  enormous  tributes  upon  its  growing  produce.  This  was  the  mode 
practised  by  the  Romans  in  the  latter  periods  of  the  republic,  and 
under  ihe  earliest  emperors.  This  is  an  expedient  of  the  same 

*  Smith,  in  his  recapitulation  of  the  real  causes  of  the  prosperity  of  Great 
Britain,  places  at  the  head  of  the  list,  "  That  equal  and  impartial  administration 
of  justice,  which  renders  the  rights  of  the  meanest  British  subject  respectable 
to  the  greatest ;  and  which,  by  securing  to  every  man  the  fruits  of  his  own  in- 
dustry, gives  the  greatest  and  most  effectual  encouragement  to  every  sort  of 
industry." — Wealth  of  Nations,  b.  iv.  c.  7. — Poivre,  who  was  a  great  traveller, 
tells  us,  that  he  never  saw  a  country  really  prosperous,  which  did  not  enjoy  the 
freedom  of  industry  as  well  as  security  of  person  and  property. 

•  (a)  This  security  is  in  fact  the  main  duty  of  all  government.  Were  it  not  for 
the  imperfections  of  human  nature — the  propensity  of  mankind  to  vice — society 
might  exist  without  government,  for  no  man  would  injure  another.  It  is  to  pro- 
tect one  against  the  vices  of  another  that  the  forms  and  institutions  of  society 
are  established  or  supported ;  thus  arming  individual  right  with  the  aggregate 
of  social  strength.  But  the  same  moral  imperfections  which  drive  mankind  into 
tne  bonds  of  society,  undermine  and  vitiate  its  institutions.  The  very  engine 
erected  to  protect,  is  directed  to  the  injury  and  spoliation  of  individuals,  and 
Incomes  occasionally  more  dangerous  than  individual  wrong.  T. 


CHAP.  XIX.  ON  PRODUCTION.  203 

nature,  as  the  acquirement  of  wealth  by  individual  acts  of  illegal 
violence  or  fraud.  There  is  no  actual  production,  but  a  mere  appro 
priation  of  the  products  of  others.  I  mention  this  method  of  acquiring 
wealth,  once  for  all,  without  meaning  to  recommend  it  as  either  saie 
or  honourable.  Had  the  Romans  followed  the  contrary  system  with 
equal  perseverance,  had  they  studied  to  spread  civilization  among 
their  savage  neighbours,  and  to  establish  a  friendly  intercourse  that 
might  have  engendered  reciprocal  wants,  the  Roman  power  would 
probably  have  existed  to  this  day. 


CHAPTER  XIX. 

OP  COLONIES  AND  THEIR  PRODUCTS. 

COLONIES  are  settlements  formed  in  distant  countries  by  an  elder 
nation,  called  the  mother-country.  When  the  latter  wishes  to  enlarge 
its  intercourse  with  a  country,  already  populous  and  civilized,  whose 
territory  it  has,  therefore,  no  hopes  of  getting  into  its  own  possession, 
it  commonly  contents  itself  with  the  establishment  of  a  factory  or 
mercantile  residence,  where  its  factors  may  trade,  in  conformity  with 
the  local  regulations,  as  the  Europeans  have  done  in  China  and  Japan. 
When  colonies  shake  off  their  dependence  upon  the  mother  country, 
they  become  substantive  and  independent  states. 

It  is  common  for  nations  to  colonize,  when  their  population  be- 
comes crowded  in  its  ancient  territorial  limits;  and  when  particular 
classes  of  society  are  exposed  to  the  persecution  of  the  rest.  These 
appear  to  have  been  the  only  motives  for  colonization  among  the 
ancients;  the  moderns  have  been  actuated  by  other  views.  The 
vast  improvements  in  navigation  have  opened  new  channels  to  their 
enterprise,  and  discovered  countries  before  unknown;  they  have 
found  their  way  to  another  hemisphere,  and  to  the  mosl  inhospitable 
climates,  not  with  the  intention  of  there  fixing  themselves  and  their 
posterity,  but  to  obtain  valuable  articles  of  commerce,  and  return  to 
their  native  countries,  enriched  with  the  fruits  of  a  forced,  but  yet 
very  extensive  production. 

It  is  worth  while  to  note  this  difference  of  motive,  which  has  made 
so  marked  a  difference  in  the  consequences  of  the  two  systems  of 
colonization.  I  am  strongly  tempted  to  call  one  the  colonial  system 
of  the  ancients,  and  the  other  the  colonial  system  of  the  moderns; 
although  there  have  been  many  colonies  in  modern  times  established 
on  the  ancient  plan,  of  which  those  of  North  America  are  the  most 
distinguished,  (a) 

(a)  The  distinction  of  the  two  systems  is  more  imaginary  than  real.  Most  of 
the  early  establishments  of  the  Europeans  in  the  West  were  made  with  the  view 


204  ON  PRODUCTION.  BOOK  I. 

The  production  of  colonies,  formed  upon  the  ancient  system,  is 
inconsiderable  at  the  commencement;  but  increases  with  great 
rapidity.  The  colonists  choose  for  their  country  of  adoption  a  spot 
where  the  soil  is  fertile,  the  climate  genial,  or  the  position  advan- 
tageous for  commercial  purposes.  The  land  is  generally  quite  fresh, 
whether  it  have  been  the  scene  of  a  dense  population  long  since 
extinguished,  or  merely  the  range  of  roving  tribes,  too  small  in 
number  and  strength  to  exhaust  the  productive  qualities  of  the  soil. 

Families  transplanted  from  a  civilized  to  an  entirely  new  country, 
carry  with  them  theoretical  and  practical  knowledge,  which  is  one 
of  the  chief  elements  of  productive  industry:  they  carry  likewise 
habits  of  industry,  calculated  to  set  these  elements  in  activity,  as 
well  as  the  habit  of  subordination,  so  essential  to  the  preservation  of 
social  order;  they  commonly  take  with  them  some  little  capital  also, 
not  in  money,  but. in  tools  and  stock  of  different  kinds:  moreover, 
they  have  no  landlord  to  share  the  produce  of  a  virgin  soil,  far 
exceeding  in  extent  what  they  are  able  to  bring  into  cultivation  for 
years  to  come.  To  these  causes  of  rapid  prosperity,  should,  perhaps, 
be  superadded  the  chief  cause  of  all,  the  natural  desire  of  mankind 
to  better  their  condition,  and  to  render  as  comfortable  as  possible  the 
mode  of  life  they  have  adopted. 

The  rapid  increase  of  products  in  colonies,  founded  upon  this  plan, 
would  have  been  still  more  striking,  if  the  colonists  had  carried  with 
them  a  larger  capital;  but,  as  we  have  already  observed,  it  is  not  the 
families  favoured  by  fortune  that  emigrate;  those  who  have  the 
command  of  a  sufficient  capital  to  procure  a  comfortable  existence 
in  their  native  country,  the  scene  of  their  halcyon  days  of  infancy, 
will  rarely  be  tempted  to  renounce  habits,  friends,  and  relations,  to 
embark  in  what  must  always  be  attended  with  hazard,  and  encounter 
the  inseparable  hardships  of  a  primitive  establishment.  This  accounts 
for  the  scarcity  of  capital  in  newly-settled  colonies;  and  is  one  reason 
why  it  bears  so  high  a  rate  of  interest  there. 

In  point  of  fact,  capital  is  of  much  more  rapid  accumulation  in 
new  colonies  than  in  countries  long  civilized.  It  would  seem  as  if 
the  colonists,  in  abandoning  their  native  country,  leave  behind  them 
part  of  their  vicious  propensities ;  they  certainly  carry  with  them 
little  of  that  fondness  for  show,  that  costs  so  dear  in  Europe,  and 
brings  so  poor  a  return.  No  qualities,  but  those  of  utility,  are  in 
estimation  in  the  country  they  are  going  to;  and  consumption  is 
limited  to  objects  of  rational  desire,  which  is  sooner  satisfied  than 
artificial  wants.  The  towns  are  few  and  small ;  the  life  of  agricul- 
turists, which  they  must  necessarily  adopt,  is  of  all  others  the  most 

of  absolute  migration.  The  French  at  St.  Domingo,  the  English  at  Barbadoes, 
the  Spaniards  almost  universally,  settled  without  the  intention  of  returning  home. 
The  introduction  of  negro  labour  was  an  after-thought.  Slavery  was  an  esta- 
blished practice  in  all  the  ancient  world,  and  colonies  either  made  prize  of  the 
indigenes,  or  imported  slaves  from  abroad,  as  soon  as  they  were  rich  enough  to 
nay  them.  T 


CHAP.  XIX.  ON  PRODUCTION.  205 

economical ;  finally,  their  industry  is  proportionately  more  produc- 
tive, and  requires  a  smaller  capital  to  work  upon. 

The  character  of  the  colonial  government  usually  accords  with 
that  of  individuals ;  it  is  active  in  the  execution  of  its  duties,  sparing 
of  expense,  and  careful  to  avoid  quarrels ;  thus  there  are  few  taxes', 
sometimes  none  at  all;  and,  since  the  government  takes  little  or 
nothing  from  the  revenues  of  the  subject,  his  ability  to  multiply  his 
savings,  and  consequently  to  enlarge  his  productive  capital,  is  very 
great.  With  very  little  capital  to  begin  upon,  the  annual  produce  of 
the  colony  very  soon  exceeds  its  consumption.  Hence,  the  astonish- 
ingly rapid  progress  in  its  wealth  and  population  ;  for  human  labour 
becomes  dear  in  proportion  to  the  accumulation  of  capital,  and  it  is 
a  well-known  maxim,  that  population  always  increases  according  to 
the  demand.* 

With  these  data,  there  is  no  difficulty  in  explaining  the  causes  of 
the  rapid  advance  of  such  colonies.  Among  the  ancients  we  find 
that  Ephesus  and  Miletus  in  Asia  Minor,  Tarentum  and  Crotona  in 
Italy,  Syracuse  and  Agrigentum  in  Sicily,  very  soon  surpassed  the 
parent  cities  in  wealth  and  consequence.  The  English  colonies  in 
North  America,  which  bear  the  closest  resemblance  of  any  in  our 
times  to  those  of  ancient  Greece,  present  a  picture  of  prosperity  less 
striking  perhaps,  but  quite  as  deserving  of  notice,  and  still  in  the 
attitude  of  advance. 

It  is  the  invariable  practice  of  colonies  founded  upon  this  plan,  and 
without  any  thoughts  of  returning  home,  to  provide  themselves  an 
independent  government;  and  even  where  the  mother-country 
reserves  the  right  of  legislation,  that  right  will  sooner  or  later  be 
dissolved  by  the  operation  of  natural  causes,  and  matters  be  brought 
to  that  footing,  on  which  justice  and  regard  to  its  real  interest  shoukf 
have  prompted  her  to  put  them  originally. 

But,  to  proceed  to  the  colonies  formed  upon  the  colonial  system 
of  the  moderns ;  the  founders  of  them  were  for  the  most  part  ad- 
venturers, whose  object  was,  not  to  settle  in  an  adopted  country, 
but  rapidly  to  amass  a  fortune,  and  return  to  enjoy  it  in  their  former 
homes.f 

The  early  adventurers  of  this  stamp  found  ample  gratification  of 
their  extravagant  rapacity,  first  in  the  cluster  of  the  Antilles,  in 
Mexico  and  Peru,  and  subsequently  in  Brazil  and  in  the  Eastern 
Indies.  After  exhausting  the  resources  previously  accumulated  by 
the  aborigines,  they  were  compelled  to  direct  their  industry  towards 
discovering  the  mines  of  these  new  countries,  and  to  turn  to  account 
the  no  less  valuable  produce  of  their  agriculture.  Successive  swarms 
of  new  colonists  poured  in  from  time  to  time,  animated  for  the  most 

*  Vide  infra,  under  the  head  of  Population,  Book  II.  c.  11. 

f  There  have  been  many  exceptions  in  North  America  and  elsewhere.  The 
colonies  of  Spain  and  Portugal  in  the  New  World  were  of  an  ambiguous  charac 
ler.  Some  of  the  colonists  contemplated  a  return :  others  went  to  establish  them- 
selves and  their  posterity;  but  the  whole  plan  of  them  has  been  subverted,  sinc« 
the  commencement  of  the  struggle  for  emancipation. 
18 


206  ON  PRODUCTION.  BOOK  L 

part  with  some  hope  of  return,  with  the  desire,  not  of  living  in 
affluence  upon  the  land  they  cultivated,  and  leaving  behind  them  a 
contented  posterity  and  a  spotless  name,  but  of  making  inordinate 
gain  to  be  afterwards  enjoyed  elsewhere :  this  motive  led  them  to 
adopt  a  system  of  compulsory  cultivation,  of  which  negro  slavery 
v/as  the  principal  instrument. 

But  let  me  ask,  in  what  manner  does  slavery  operate  upon  pro- 
duction ?  Is  the  labour  of  the  slave  less  costly  than  that  of  the  free 
labourer?  This  is  an  important  inquiry,  originating  in  the  influence 
of  the  modern  system  of  colonization  upon  the  multiplication  of 
wealth. 

Stewart,  Turgot,  and  Smith,  all  agree  in  thinking,  that  the  labour 
of  the  slave  is  dearer  and  less  productive  than  that  of  the  freeman. 
Their  arguments  amount  to  this :  a  man,  that  neither  works  nor  con- 
sumes on  his  own  account,  works  as  little  and  consumes  as  much  as 
he  can :  he  has  no  interest  in  the  exertion  of  that  degree  of  care  and 
intelligence,  which  alone  can  insure  success :  his  life  is  shortened  by 
excessive  labour,  and  his  master  must  replace  it  at  great  expense . 
besides,  the  free  workman  looks  after  his  own  support ;  but  that  of 
the  slave  must  be  attended  to  by  the  master ;  and,  as  it  is  impossible, 
for  the  master  to  do  it  so  economically  as  the  free  workman,  the 
labour  of  the  slave  must  cost  him  dearer.* 

This. position  has  been  controverted  by  the  following  calculation: 
The  annual  expense  of  a  negro  in  the  West  Indies,  upon  the  planta- 
tions most  humanely  administered,  does  not  exceed  60  dollars :  add 
the  interest  of  his  prime  cost,  say  at  ten  per  cent.,  for  it  is  a  life  in- 
terest ;  the  average  price  of  a  negro  is  about  400  dollars,  so  that, 
allowing  40  dollars  for  the  annual  interest,  the  whole  expense  of  a 
negro  to  his  owner  is  but  100  dollars  per  annum,  (a)  a  sum,  doubtless, 
much  inferior  to  the  charge  of  free  labour  in  that  part  of  the  world. 
An  ordinary  free  labourer  may  earn  there  from  a  dollar  to  a  dollar 
and  a  half  per  day,  or  even  more.  Taking  the  medium  of  a  dollar 
and  a  quarter,  and  reckoning  about  300  working  days  in  the  year, 
the  annual  wages  will  amount  to  375  instead  of  100  dollars.f 

*  Stewart  (Sir  Jas.)  Inquiry  into  the  Prin.  of  Pol.  Econ.  book  ii.  c.  607. 
Turgot.  Reflections  sur  la  Formation  et  la  Distribution  des  Richesses,  §  23. 
Smith.  Wealth  of  Nations,  book  i.  c.  8 ;  book  iii.  c.  2. 

f  It  should  be  observed  here,  that  the  free  labourers,  who  are  so  much  better 
paid,  are  commonly  engaged  in  occupations  which,  though  less  laborious,  re- 
quire a  greater  degree  of  intelligence  and  personal  skill.  Tailors  and  watch- 
makers are  generally  free  men.  And  the  mere  existence  of  slavery  itself  enhan- 
ces the  price  of  free  field  labour  by  driving  all  competition  out  of  the  market. 

(a)  In  this  calculation  no  account  has  been  taken  of  the  housing  of  the  negro, 
the  tools  and  implements  supplied  to  him,  or  the  clothing  furnished  by  the 
master ;  neither  does  our  author  seem  to  make  any  allowance  for  the  probable 
increase  of  agricultural  production,  which  free  negro  labour  might  afford.  Free 
European  labour  would  doubtless  be  far  more  expensive,  were  it  practicable. 
The  interest  of  money  is  also  estimated  far  too  low,  and  the  infant  and  the  aged 
must  be  provided  for  by  the  master.  T. 


CHAP.  XIX.  ON  PRODUCTION.  20* 

Common  sense  will  tell  us,  that  the  consumption  of  a  slave  must 
be  less  than  that  of  a  free  workman.  The  master  cares  not  if  hi& 
slave  enjoy  life,  provided  he  do  but  live ;  a  pair  of  trowsers  and  a 
jacket  are  the  whole  wardrobe  of  the  negro :  his  lodging  a  bare* hut, 
and  his  food  the  manioc  root,  to  which  kind  masters  now  and  then 
add  a  little  dried  fish.  A  population  of  free  workmen,  taken  one 
with  another,  has  women,  children,  and  invalids  to  support:  the  ties 
of  consanguinity,  friendship,  love,  and  gratitude,  alt  contribute  to 
multiply  consumption;  whereas,  the  slave-owner  is  often  relieved 
by  the  effects  of  fatigue  from  the  maintenance  of  the  veteran :  the 
tender  age  and  sex  enjoy  little  exemption  from  labour ;  and  even  the 
soft  impulse  of  sexual  attraction  is  subject  to  the  avaricious  calcula- 
tions of  the  master. 

What  is  the  motive  which  operates  in  every  man's  breast  to 
counteract  the  impulse  towards  the  gratification  of  his  wants  and 
appetites  ?  Doubtless,  the  providential  care  of  the  future.  Human 
wants  and  appetites  have  a  tendency  to  extend — frugality  to  reduce 
consumption ;  and  it  is  easy  to  conceive,  that  these  opposite  motives, 
working  in  the  mind  of  the  same  individual,  help  to  counteract  each 
other.  But,  where  there  are  master  and  slave,  the  balance  must  needs 
incline  to  the  side  of  frugality ;  the  wants  and  appetites  operate  upon 
the  weaker  party,  and  the  motive  of  frugality  upon  the  stronger. 
It  is  a  well-known  fact,  that  the  net  produce  of  an  estate  in  St.  Do- 
mingo cleared  off  the  whole  purchase-money  in  six  years;  whereas 
in  Europe  the  net  produce  seldom  exceeds  the  one  twenty-fifth  or 
one  thirtieth  of  the  purchase-money,  and  sometimes  falls  far  short 
even  of  that.  Smith,  himself,  elsewhere  tells  us,  that  the  planters  of 
the  English  islands  admit  that  the  rum  and  molasses  will  defray  the 
whole  expenses  of  a  sugar  plantation,  leaving  the  total  produce  of 
sugar  as  net  proceeds:  which,  as  he  justly  observes,  is  much  the 
same  as  if  our  farmers  were  to  pay  their  rent  and  expenses  with  the 
straw  only,  and  to  make  a  clear  profit  of  all  the  grain.  Now  I  ask, 
how  many  products  are  there  that  exceed  the  expenses  of  produc- 
tion in  the  same  degree  1  (a) 

Indeed,  this  very  exorbitance  of  profit  shows,  that  the  industry  of 
the  master  is  paid  out  of  all  proportion  with  that  of  the  slave.  To 
the  consumer  it  makes  no  difference.  One  of  the  productive  classes 
benefits  by  the  depression  of  the  rest ;  and  that  would  be  all,  were  it 
not  that  the  vicious  system  of  production,  resulting  from  this  de- 
rangement, opposes  the  introduction  of  a  better  plan  of  industry. 
The  slave  and  the  master  are  both  degraded  beings,  incapable  of  ap- 
proximating to  the  perfection  of  industry,  and,  by  their  contagion, 
degrading  the  industry  of  the  free  man,  who  has  no  slaves  at  his 

(a)  What  reference  can  this  inequality  have  to  the  relative  position  of  the 
proprietor  and  the  different  productive  agents  one  to  another  ?  j.t  is  a  mere 
question  of  difference  of  interest  of  capital.  Capital  in  the  West  Indies  bring* 
ft  return  very  different,  in  its  ratio,  to  rent  or  the  profit  of  land,  from  what  it 
yields  in  Europe.  Land,  the  source  of  production,  sells  cheap,  because  of  the 
greater  unhealthiness  of  climate,  insecurity  of  tenure,  abundance,  &c.  &c.  T 


208  ON  PRODUCTION.  BOOK  1. 

command.  For  labour  can  never  be  honourable,  or  even  respectable, 
where  it  is  executed  by  an  inferior*caste.  The  forced  and  unnatural 
superiority  of  the  master  over  the  slave,  is  exhibited  in  the  affecta- 
tiomof  lordly  indolence  and  inactivity :  and  the  faculties  of  rnind 
are  debased  in  an  equal  degree ;  the  place  of  intelligence  is  usurped 
by  violence  and  brutality. 

I  have  been  told  by  travellers  of  veracity  and  observation,  that 
they  consider  %11  progress  in  the  arts  in  Brazil  and  other  settlements 
of  America  as  utterly  hopeless,  while  slavery  shall  continue  to  be 
tolerated.  Those  states  of  the  North  American  Union,  which  have 
proscribed  slavery,  are  making  the  largest  strides  towards  national 
prosperity.  The  inhabitants  of  the  slave  states  of  Georgia  and  Caro- 
lina raise  the  best  cotton  in  the  world,  but  cannot  work  it  up.  Dur- 
ing the  last  war  with  England,  they  were  obliged  to  send  it  over 
land  to  New- York  to  be  spun  into  yarn.  The  same  cotton  is  sent 
back  at  a  vast  expense  to  be  consumed  at  the  place  of  its  original 
growth  in  a  manufactured  state,  (a)  This  is  a  just  retribution  for  the 
toleration  of  a  practice,  by  which  one  part  of  mankind  is  made  to 
labour,  and  subjected  to  the  severest  privation,  for  the  benefit  of  an- 
other. Policy  is  in  this  point  in  accordance  with  humanity,  (b) 

It  remains  yet  to  be  explained,  what  are  the  consequences  of  the 
comme,  cial  intercourse  between  the  colony  and  the  mother  country, 
in  regard  to  production ;  always  taking  it  for  granted,  that  the  colony 
continues  in  a  state  of  dependence,  for  the  moment  it  shakes  off  the 
yoke,  it  has  nothing  colonial  but  its  origin,  and  stands  in  relation  to 
the  mother-country,  on  exactly  the  same  footing  as  any  other  nation 
on  the  globe. 

The  parent  state,  with  a  view  to  secure  to  the  products  of  its  own 
soil  and  industry  the  market  of  colonial  consumption,  generally  pro- 
hibits the  colonists  from  purchasing  European  commodities  from  any 
one  else,  which  enables  her  own  merchants  to  sell  their  goods  in  the 
colony  for  somewhat  more  than  they  are  currently  worth.  This  is 
a  benefit  conferred  on  the  subjects  of  the  parent  state  at  the  expense 
of  the  colonists,  who  are  likewise  its  subjects.  Considering  the 
mother-country  and  the  colony  to  be  integral  parts  of  one  and  the 
same  state,  the  profit  and  loss  balance  each  other ;  and  this  restric- 
tion is  nugatory,  except  inasmuch  as  it  entails  the  charge  of  an 

(a)  So  it  is  now  from  Hindostan,  where  labour  is  free  and  most  abundant. 
Cotton  will  flow  towards  machinery,  which  has  become  too  powerful  for  the 
competition  of  human  labour,  even  where  it  is  the  cheapest.  That  is,  therefore, 
not  the  effect  of  the  toleration  of  slavery  in  those  states.  T. 

(6)  Therefore  our  author  has  come  to  this  correct  conclusion,  his  reasoning 
is  neither  logical  nor  satisfactory  ;  indeed,  the  whole  of  this  important  subject 
is  dismissed  with  a  precipitation  little  suited  to  its  importance.  There  are  two 
motives  of  human  industry,  the  hope  of  enjoyment,  and  the  fear  of  suffering-. 
The  slave  is  actuated  principally  by  the  latter,  the  free  agent  by  the  former. 
Neither  of  these  motives  should  have  been  thus  cursorily  adverted  to  in  the 
inalysis  of  actual  production,  but  have  been  fairly  set  forth  in  the  outset,  imme- 
diately after  the  detail  of  the  sources  of  production ;  being  both  of  them  the 
tlimuli  which  give  activity  to  those  sources.  After  all  that  our  author  ano 
others  have  done,  much  yet  remains  for  the  organization  of  the  science.  T. 


CHAP.  XIX.  ON  PRODUCTION.  209 

establishment  of  custom  or  excise  officers ;  and  thus  increases  the 
national  expenditure. 

While,  on  the  one  hand,  the  colonists  are  obliged  to  buy  of  the 
mother-country,  they  are,  on  the  other,  compelled  to  sell  their 
colonial  produce  exclusively  to  its  merchants,  who  thus  obtain  an 
extra  advantage  without  any  creation  of  value,  at  the  expense,  like- 
wise, of  the  colonists,  by  the  enjoyment  of  an  exclusive  privilege, 
and  of  exemption  from  competition.  Here,  too,  the  profit  and  loss 
destroy  each  other  nationally,  but  not  individually^  what  a  merchant 
of  Havre  or  Bordeaux  gains  in  this  way  is  substantial  profit ;  but  it 
is  taken  from  the  pockets  of  one  or  more  subjects  of  the  same  state, 
who  had  equal  right  to  have  their  interest  attended  to.  It  is  true, 
indeed,  that  the  colonists  are  indemnified  in  another  way;  viz.  either 
by  the  miseries  of  the  slave  population,  as  we  have  already  explained ; 
or  by  the  privations  of  the  inhabitants  of  the  mother-country,  as.  I 
am  about  to  show. 

So  completely  is  the  whole  system  built  upon  compulsions,  re- 
striction, and  monopoly,  that  these  very  domestic  consumers  are 
compelled  to  buy  what  colonial  articles  of  consumption  they  require 
exclusively  from  the  national  colonies ;  every  other  colony,  and  all 
the  rest  of  the  world,  being  denied  the  liberty  of  importing  colo- 
nial* produce,  or  subjected  to  the  payment  of  a  heavy  fine,  in  the 
shape  of  an  import  duty. 

It  would  seem  that  the  home-consumer  should  at  any  rate  derive 
an  obvious  benefit,  in  the  price  of  colonial  produce,  from  his  exclu- 
sive right  of  purchasing  of  the  colonists.  But  even  this  unjust  pre- 
ference is  denied  him  ;  for,  as  soon  as  the  produce  arrives  in  Europe, 
the  home-merchant  is  allowed  to  re-export  and  sell  it  where  he 
chooses,  and  particularly  to  those  nations  that  have  no  colonies  of 
their  own ;  so  that,  after  all,  the  planter  is  deprived  of  the  competi- 
tion of  buyers,  although  the  home-consumer  is  made  to  suffer  its 
full  effect. 

All  these  losses  fall  chiefly  upon  the  class  of  home-consumers, 
a  class  of  all  others  the  most  important  in  point  of  number,  and 
deserving  of  attention  on  account  of  the  wide  diffusion  of  the 
evils  of  any  vicious  system  affecting  it,  as  well  as  the  functions 
it  performs  in  every  part  of  the  social  machine,  and  the  taxes  it 
contributes  to  the  public  purse,  wherein  consists  the  power  of 
the  government.  They  may  be  divided  into  two  parts ;  whereof 
the  one  is  absorbed  in  the  superfluous  charges  of  raising  the  colonial 
produce,  which  might  be  got  cheaper  elsewhere  ;f  this  is  a  dead  loss 

*  Or  equinoctial ;  the  term  is  applied  to  the  ordinary  products  of  equinoctial 
latitudes. 

f  Poivre,  a  writer  of  great  information  and  probity,  assures  us,  that  whitn 
sugar  of  the  best  quality  is  sold  in  Cochin-China,  at  the  rate  of  about  3  dollars 
per  quintal  of  the  country,  which  is  little  more  than  two  cents  per  pound,  and 
that  more  than  80  millions  of  pounds  are  tHence  exported  annually  to  China  at 
that  rate.  Adding  300  per  cent. for  the  charges  and  profits  of  trade,  which  is  a 
most  liberal  allowance,  the  sugar  of  Cochin-China  might,  under  a  free  trade,  bv 
sold  in  France  at  from  8  to  9  cents  a  pound. 
18*  2  B 


210  ON  PRODUCTION.  BOOK  L 

to  the  consumer,  without  gain  to  any  body.  The  other  part,  which 
is  also  paid  by  the  consumer,  goes  to  make  the  fortunes  of  West- 
Indian  planters  and  merchants.  The  wealth  thus  acquired  is  the 
produce  of  a  real  tax  upon  the  people,  although,  being  centred  in 
few  hands,  it  is  apt  to  dazzle  the  eyes,  and  be  mistaken  for  wealth 
of  colonial  and  commercial  acquisition.  And  it  is  for  the  protection 
of  this  imaginary  advantage,  that  almost  all  the  wars  of  the  eigh- 
teenth century  have  been  undertaken,  and  that  the  European  states 
have  thought  themselves  obliged  to  keep  up,  at  a  vast  expense,  civil 
and  judicial,  as  well  as  marine  and  military,  establishments,  at  the 
opposite  extremities  of  the  globe.* 

When  Poivre  was  appointed  governor  of  the  Isle  of  France,  the 
colony  had  not  been  planted  more  than  50  years;  yet  he  calcu- 
lated it  to  have  then  cost  France  no  less  than  12  millions  of  dollars' 
to  be  a  source  of  regular  and  large  out-going ;  and  to  bring  her  no 
return  of  any  kind  whatsoever.f  It  is  true,  that  the  money  spent 
on  the  defence  of  that  settlement  had  the  further  object  of  uphold- 
ing our  other  possessions  in  the  East  Indies ;  but,  when  we  find  that 
these  latter  were  still  more  expensive  both  to  the  government  and 
to  the  proprietors  of  the  two  companies,  old  and  new,  it  is  impossi- 
ble to  deny,  that  all  we  gained  by  keeping  the  Mauritius  at  this 
enormous  expense  was,  the  opportunity  of  a  further  waste  in  Ben- 
gal and  on  the  coast  of  Coromandel. 

The  same  observations  will  apply  to  such  of  our  possessions  in 
other  parts  of  the  world,  as  were  of  no  importance,  but  in  a  military 
point  of  view.  Should  it  be  pretended,  that  these  stations  are  kept 
up  at  a  great  sacrifice,  not  with  the  object  of  gain,  but  to  extend  and 
affirm  the  power  of  the  mother-country,  it  might  yet  be  asked,  why 
maintain  them  at  such  a  loss,  since  this  power  has  no  other  object 
but  the  preservation  of  the  colonies,  which  turn  out  to  be  themselves 
a  losing  concern  ?  J 

That  England  has  benefited  immensely  by  the  loss  of  her  North 

The  English  already  derive  from  Asia  a  considerable  quantity  hoth  of  sugar 
and  indigo,  at  a  cheaper  rate  than  those  of  the  West  Indies.  And,  doubtless,  if 
the  Europeans  were  to  plant  independent  and  industrious  colonies  along  the 
northern  coast  of  Africa,  the  culture  of  equinoctial  products  there  would  rapidly 
gain  ground,  and  supply  Europe  in  greater  abundance  at  a  still  cheaper  rate. 

*  Arthur  Young,  in  1789,  estimated  the  annual  charge  entailed  on  France,  by 
the  possession  of  St.  Domingo,  at  9  millions  of  dollars.  He  has  gone  into 
detail  to  prove,  that,  if  the  sums  spent  on  her  colonies  for  25  years  only  had 
been  devoted  to  the  improvement  of  any  one  of  her  own  provinces,  she  would  have 
acquired  an  annual  addition  of  24  millions  of  dollars,  net  revenue,  consisting  of 
actual  products,  without  loss  to  any  body-  Vide  his  Journey  in  France. 

f  CEuvres  de  Poiore,  p.  209.  In  this  estimate  he  takes  no  account  of  the  charge 
of  the  military  and  marine  establishment  of  France  herself,  of  which  a  part 
should  be  set  down  to  the  colony. 

I  Vide  the  works  of  Benjamin  Franklin,  vol.  ii.  p.  50,  for  the  opinion  of  that 
celebrated  man,  who  had  so  much  experience  in  these  matters.  I  find  it  stated 
in  the  Travels  of  Lord  Valentia  that  the  Cape  of  Good  Hope,  in  1802,  cost  Eng- 
land an  excess  of  from  1,000,000  to  1,200,000  dollars  per  annum  above  its  own 
•o^enue 


CHAP.  XIX.  ON  PRODUCTION.  211 

American  colonies,  is  a  fact  no  one  has  attempted  to  deny.*  Yet  she 
spent  the  incredible  sum  of  335,000,000  dollars  in  attempting  to  retain 
possession ;  a  monstrous  error  in  policy  indeed ;  for  she  might  have 
enjoyed  the  same  benefits,  that  is  to  say,  have  emancipated  her  colo- 
nies, without  expending  a  sixpence ;  besides  saving  a  profusion  of 
gallant  blood,  and  gaining  credit  for  generosity,  in  the  eyes  of 
Europe  and  posterity-! 

The  blunders  committed  by  the  ministers  of  George  III.,  during 
the  whole  course  of  the  first  American  war,  in  which,  indeed,  they 
were  unhappily  abetted,  by  the  corruption  of  the  parliament  and  the 
pride  of  the  nation,  were  imitated  by  Napoleon,  in  his  attempt  to 
reduce  the  revolted  negroes  of  St.  Domingo.  Nothing  but  its  dis- 
tance and  maritime  position  prevented  that  scheme  from  proving 
equally  disastrous  with  the  war  of  Spain.  Yet,  comparatively,  the 
independence  of  that  fine  island  might  have  been  made  equally  pro- 
ductive of  commercial  benefit  to  France,  as  that  of  America  had  been 
to  England.  It  is  high  time  to  drop  our  absurd  lamentations  for  the 
loss  of  our  colonies,  considered  as  a  source  of  national  prosperity. 
For,  in  the  first  place,  France  now  enjoys  a  greater  degree  of  pros- 
perity, than  while  she  retained  her  colonies;  witness  the  increase  of 
her  population.  Before  the  revolution,  her  revenues  could  maintain 
but  twenty-five  millions  of  people :  they  now  support  thirty-two 
millions  and  a  half,  (1831)  (1).  In  the  second  place,  the  first  princi- 

*  "  Bristol  was  one  of  the  chief  entrepots  of  North  American  commerce.  Her 
principal  merchants  and  inhabitants  joined  in  a  most  energetic  representation  to 
parliament,  that  their  city  would  be  infallibly  ruined  by  the  acknowledgment  of 
American  independence ;  adding,  that  their  port  would  be  so  deserted,  as  not  to  be 
worth  the  charge  of  keeping  up.  Notwithstanding  their  representations,  peace 
became  a  matter  of  necessity,  and  the  dreaded  separation  was  consented  to. 
Ten  years  had  scarcely  elapsed  after  this  event,  when  the  same  worthy  persons 
petitioned  the  parliament  for  leave  to  enlarge  and  deepen  the  port,  which, 
instead  of  being  deserted,  as  they  had  apprehended,  was  incapable  of  receiving 
the  influx  of  additional  shipping,  that  the  commerce  of  independent  America 
had  given  birth  to."  De  Levis,  Lettres  Chinoises. 

f  These  remarks  are  not  altogether  applicable  to  the  British  dependencies  in 
the  East;  because  there  the  nation  is  rather  a  conqueror  than  a  colonist,  having 
the  domination  over  thirty-two  millions  of  inhabitants,  and  the  absolute  disposal 
of  the  revenue  levied  upon  them.  But  the  clear  national  profits  derived  from  the 
acquisition  is  by  no  means  so  considerable,  as  may  be  generally  supposed ;  for 
the  charges  of  administration  and  protection  must  be  deducted.  Colquhoun,  in 
his  Treatise  on  the  Wealth,  Power,  and  Resources  of  the  British  Empire,  which 
gives  an  exaggerated  picture  of  them,  states  the  total  revenue  of  the  sovereign 
company,  at  18,051,478?.  sterling;  and  its  expenditure  at  16,984,271 1. ;  leaving  a 
surplus  of  1,067,207*. 

In  all  probability  were  India  in  a  state  of  national  independence,  the  commerce 
between  her  and  Great  Britain  would  increase  so  much,  as  to  produce  to  the  lat- 
ter an  additional  revenue,  larger  than  the  amount  of  that  surplus,  to  say  nothing 
of  the  increase  of  individual  profits. 

(1)  The  population  of  France,  notwithstanding  the  interruption  to  industry, 
and  the  drains  occasioned  by  the  long  wars,  has  increased  since  the  commence- 
ment of  the  Revolution.  According  to  calculations  made  by  the  National  Assem- 
bly in  1791,  France  contained  26,363,074  inhabitants,  and  in  1831  it  contain<jd 


212  ON  PRODUCTION.  BOOK  I. 

pies  of  political  economy  will  teach  us,  that  the  loss  of  colonies  by  no 
means  implies  a  loss  of  the  trade  with  them.  Wherewith  did  France 
before  buy  the  colonial  products  1  with  her  own  domestic  products  to 
be  sure.  Has  she  not  since  continued  to  buy  them  in  the  same 
way,  though  sometimes  of  a  neutral,  or  even  an  enemy  ? 

I  admit,  that  the  ignorance  and  vices  of  her  rulers  for  the  time 
being  have  made  her  pay  for  those  products  much  dearer  than  she 
need  have  done ;  but  now  that  she  buys  them  at  the  natural  price, 
(exclusive,  of  course,  of  the  import  duties,)  and  pays  for  them  as 
before  with  her  domestic  products,  in  what  way  is  she  a  loser  ? 
Political  convulsions  have  given  a  new  direction  to  commerce ;  the 
import  of  sugar  and  coffee  is  no  longer  confined  to  Nantes  and  Bor- 
deaux ;  and  those  cities  have  suffered  in  consequence.  But,  as 
France  now  consumes  at  least  as  much  of  those  articles  as  she  ever 
did,  all,  that  has  not  come  by  the  way  of  Nantes  or  Bordeaux,  must 
needs  have  found  its  way  in  some  other  channel.  France  can  not 
have  bought  in  any  other  way,  than  as  of  old,  with  the  products  of 
her  own  land,  capital,  and  industry;  for,  excepting  robbery  and  piracy, 
one  nation  has  no  other  means  of  buying  of  another.  Indeed,  France 
might  have  benefited  largely  by  the  trade  which  has  supplanted  her 
own  colonial  commerce,  had  not  old  prejudices  and  erroneous 
notions  constantly  opposed  the  natural  current  of  human  affairs. 

Perhaps  it  may  be  argued,  that  the  colonies  furnish  commodities 
which  are  nowhere  else  to  be  had.  The  nation,  therefore,  that 
should  have  no  share  of  territories  so  highly  favoured  by  nature, 
would  lie  at  the  mercy  of  the  nation  that  should  first  get  possession  $ 
for  the  monopoly  of  purchasing  the  colonial  produce  would  enable 
her  to  exact  her  own  price  from  her  less  fortunate  neighbour.  Now 
it  is  proved  beyond  all  doubt,  that  what  we  erroneously  call  colonial 
produce,  grows  everywhere  within  the  tropics,  where  the  soil  is 
adapted  to  its  cultivation.  The  spices  of  the  Moluccas  are  found  to 
answer  at  Cayenne,  and  probably  by  this  time  in  many  other  places ; 
and  no  monopoly  was  ever  more  complete,  than  the  trade  of  the 
Dutch  in  that  commodity.  They  had  sole  possession  of  the  only 
spice  islands,  and  allowed  nobody  else  to  approach  them.  Has  Eu- 
rope been  in  any  want  of  spices,  or  has  she  bought  them  for  theii 
weight  in  gold  1  Have  we  any  reason  to  regret  the  not  having  de- 
voted two  hundred  years  of  war,  fought  a  score  of  naval  battles,  and 
sacrificed  some  hundreds  of  millions,  and  the  lives  of  half  a  million 
of  our  fellow-creatures,  for  the  paltry  object  of  getting  our  pepper 
and  cloves  cheaper  by  some  two  or  three  sous  a  pound?  And  this 
example,  il  is  worth  while  to  observe,  is  the  most  favourable  one 
for  the  colonial  system,  that  could  possibly  be  selected.  One  can 
hardly  imagine  the  possibility  of  monopolizing  sugar,  a  staple  pro- 
duct of  most  parts  of  Asia,  Africa,  and  America,  so  completely  as 

32,560,000  within  the  same  limits.  The  annual  increase  is  about  200,000  indi- 
"iduais.  ( Vide  Annuaire  pour  TAn  1834.)  AMERICAN  EDITOR. 


CHAP.  XX.  ON  PRODUCTION.  213 

the  Dutch  did  the  spice  trade ;  yet  has  this  very  trade  been  snatched 
from  the  avaricious  grasp  of  the  monopolist  nation,  almost  without 
firing  a  shot 

The  ancients,  by  their  system  of  colonization,  made  themselves 
friends  all  over  the  known  world;  the  moderns  have  sought  to  make 
subjects,  and  therefore  have  made  enemies.  Governors,  deputed  by 
the  mother-country,  feel  not  the  slightest  interest  in  the  diffusion  of 
happiness  and  real  wealth  amongst  a  people,  with  whom  they  do  not 
propose  to  spend  their  lives,  to  sink  into  privacy  and  retirement,  or 
to  conciliate  popularity.  They  know  their  consideration  in  the 
mother -country  will  depend  upon  the  fortune  they  return  with,  not 
upon  their  behaviour  in  office.  Add  to  this  the  large  discretionary 
power,  that  must  unavoidably  be  vested  in  the  deputed  rulers  of 
distant  possessions,  and  there  will  be  every  ingredient  towards  the 
composition  of  a  truly  detestable  government. 

It  is  to  be  feared,  that  men  in  power,  like  the  rest  of  mankind, 
are  too  little  disposed  to  moderation,  too  slow  in  their  intellectual 
progress,  embarrassed  as  it  is  at  every  step  by  the  unceasing 
manoeuvres  of  innumerable  retainers,  civil,  military,  financial,  and 
commercial;  all  impelled,  by  interested  motives,  to  present  things 
in  false  colours,  and  involve  the  simplest  questions  in  obscurity,  to 
allow  any  reasonable  hope  of  accelerating  the  downfall  of  a  system, 
which  for  the  last  three  or  four  hundred  years  must  have  wonder- 
fully abridged  the  inestimable  benefits,  that  mankind  at  large,  in  all 
the  five  great  divisions  of  the  globe,*  have,  or  ought  to  have  derived 
from  the  rapid  progress  of  discovery,  and  the  prodigious  impulse 
given  to  human  industry  since  the  commencement  of  the  sixteenth 
century.  The  silent  advances  of  intelligence,  and  the  irresistible 
tide  of  human  affairs,  will  alone  effect  its  subversion. 


CHAPTER  XX. 

OP  TEMPORARY   AND   PERMANENT   EMIGRATION,  CONSIDERED   IN  REFERENCE 
TO  NATIONAL  WEALTH. 

WHEN  a  traveller  arrives  in  France,  and  there  spends  2000  dol- 
lars, it  must  not  be  supposed  that  the  whole  sum  is  clear  profit  to 
France.  The  traveller  expends  it  in  exchange  for  the  values  he 
consumes :  the  effect  is  just  the  same,  as  if  he  had  remained  abroad 
and  sent  to  France  for  what  he  wanted,  instead  of  coming  and  con- 
suming it  here ;  and  is  precisely  similar  to  that  of  international  com- 

*  The  vast  continent  of  New  Holland,  with  its  surrounding  islands,  is  now 
generally  considered  by  geographers  as  a  distinct  portion  of  the  globe,  under  tne 
denomination  of  Australia  or  Australasia,  which  has  been  given  to  it  on  account 
of  its  position  exclusively  within  the  southern  hemisphere. 


214  ON  PRODUCTION.  BOOK  L 

merce,  in  which  the  profit  made  is  not  the  whole  or  principal  value 
received,  but  a  larger  or  smaller  per  centage  upon  that  principal 
according  to  the  circumstances. 

The  matter  has  not  hitherto  been  viewed  in  this  light.  In  the 
firm  conviction  of  this  maxim,  that  metal  money  was  the  only  item 
of  real  wealth,  people  imagined,  that,  if  a  foreigner  came  amongst 
them  with  2000  dollars  in  his  pocket,  it  was  so  much  clear  profit  to 
the  nation ;  as  if  the  tailor  that  clothes  him,  the  jeweller  that  fur- 
nishes him  with  trinkets,  the  victualler  that  feeds  him,  gave  him  no 
values  in  exchange  for  his  specie,  but  made  a  profit  equal  to  the  total 
of  their  respective  charges.  All  that  the  nation  gains  is  the  profit 
upon  its  dealings  with  him,  and  upon  what  he  purchases:  and  this 
is  by  no  means  contemptible,  for  every  extension  of  commerce  is  a 
pi oportionate  advantage;*  but  it  is  well  to  know  its  real  amount, 
that  we  may  not  be  betrayed  into  the  folly  of  purchasing  it  too 
dearly.  An  eminent  writer  upon  commercial  topics,  tells  us,  that 
theatrical  exhibitions  cannot  be  too  grand,  too  splendid,  or  too 
numerous ;  for  that  they  are  a  kind  of  traffic  wherein  France  re- 
ceives all  and  pays  nothing ;  a  proposition  which  is  the  very  reverse 
of  truth ;  for  France  pays,  that  is  to  say,  loses,  the  l^hole  expense  of 
the  exhibition,  which  is  productive  of  nothing  but  barren  amuse- 
ment, and  leaves  no  value  whatever  to  replace  what  has  been  con- 
sumed on  it.  Fetes  of  this  description  may  be  very  pleasant  things 
as  affording  amusement,  but  must  make  a  ridiculous  figure  as*a  specu- 
lation of  profit  and  loss.  What  would  people  think  of  a  tradesman, 
that  was  to  give  a  ball  in  his  shop,  hire  performers,  and  hand  re- 
freshments about,  with  a  view  to  benefit  in  his  business?  Besides, 
it  may  be  reasonably  doubted,  whether  a  fete  or  exhibition  of  the 
most  splendid  kind,  does  in  reality  occasion  any  considerable  influx 
of  foreigners.  Such  an  influx  would  be  much  more  powerfully 
attracted  by  commerce,  or  by  rich  fragments  of  antiquity,  or  by 
master-pieces  of  art  nowhere  else  to  be  seen,  or  by  superiority  of 
climate,  or  by  the  properties  of  medicinal  waters,  or,  most  of  all,  by 
the  desire  of  visiting  the  scenes  of  memorable  events,  and  of  learn- 
ing a  language  of  extensive  acceptation.  I  am  strongly  inclined  to 
believe,  that  the  enjoyment  of  a  few  empty  pleasures  of  vanity  has 
never  attracted  much  company  from  any  great  distance.  People 
may  go  a  few  leagues  to  a  ball  ,or  entertainment,  but  will  seldom 
make  a  journey  for  the  purpose.  It  is  extremely  improbable,  that 
the  vast  number  of  Germans,  English,  and  Italians,  who  visit  the 
capital  of  France  in  time  of  peace,  are  actuated  solely  by  the  desire 

*A  strange  country  has  some  advantages  over  the  traveller,  and  its  deal- 
ings with  him  may  be  considered  as  lucrative ;  for  his  ignorance  of  the  lan- 
guage and  of  prices,  and  often  a  spice  of  vanity,  make  him  pay  for  most  of 
the  objects  of  his  consumption  above  the  current  rate.  Besides,  the  public 
sights  and  exhibitions,  which  he  there  pays  for  seeing,  are  expenses  already 
incurred  by  the  nation,  which  he  nowise  aggravates  by  his  presence.  But 
Jiesp  advantages,  though  real  and  positive,  are  very  limited  in  amount,  and 
iiust  not  be  over-rated. 


CHAP.  XX.  ON  PRODUCTION.  215 

of  seeing  the  French  opera  at  Paris.  That  city  has  iortunately 
many  worthier  objects  of  general  curiosity.  In  Spain,  the  bull- 
fights are  considered  very  curious  and  attractive;  yet  I  cannot  think 
many  Frenchmen  have  gone  all  the  way  to  Madrid  to  witness  that 
diversion.  Foreigners,  that  have  already  come  into  the  country  on 
other  accounts,  are,  indeed,  frequent  spectators  of  such  exhibitions ; 
but  it  was  not  solely  with  this  object  that  they  first  set  out  upop  their 
journey,  (a) 

The  vaunted  fetes  of  Louis  XIV.  had  a  still  more  mischievous 
tendency.  The  sums  spent  upon  them  were  not  supplied  by  foreign 
ers,  but  by  French  provincial  visitors,  who  often  spent  in  a  week,  as 
much  as  would  have  maintained  their  families  at  home  for  a  year. 
So  that  France  was  two  ways  a  loser ;  first,  of  the  sums  expe'nded 
by  the  monarch,  which  had  been  levied  on  the  subjects  at  large ; 
secondly,  of  all  that  was  spent  by  individuals.  .  The  sum  total  of 
the  consumption  was  thrown  away,  that  a  few  tradesmen  of  the 
metropolis  might  make  their  profits  upon  it;  which  they  would 
equally  have  done,  had  their  industry  and  capital  taken  a  more 
beneficial  direction. 

A  stranger,  that  comes  into  a  country  to  settle  there,  and  brings 
his  fortune  along  with  him,  is  a  substantial  acquisition  to  the  nation. 
There  is  in  this  case  an  accession  of  two  sources  of  wealth,  industry 
and  capital :  an  accession  of  full  as  much  value,  as  the  acquirement 

(a)  This  has  become  a  matter  of  some  interest  to  England,  whose  unpro- 
ductive capitalists  and  proprietors  have  absolutely  overwhelmed  the  society  of 
France  and  a  great  part  of  Italy,  where  they  consume  an  immense  revenue, 
derived  from  Britain  by  the  export  of  her  manufactures  without  any  return. 
Thus  their  native  country  is,  pro  tanto,  a  producer  without  being  a  consumer — 
the  scene  of  exertion  but  not  of  enjoyment.      This   circumstance,  although 
nowise  prejudicial  to  her  productive  powers,  is  extremely  so  to  the  comfort  and 
enjoyment  and  content  of  her  population ;  for  there  are  few  enjoyments  so  per- 
sonal and  selfish,  as  not  to  be  diffused  in  some  degree  or  other  at  the  moment 
and  place  of  consumption.     Besides,  the  presence  of  the  proprietor  is  always  a 
benefit,  especially  in  Great  Britain,  where  so  many  public  duties  are  gratuitously 
performed.     Ireland  suffers  in  a  worse  degree;   her  gentry  are  attracted  by 
England  as  well  as  the  continent ;  and  the  consequences  have  long  been  matter 
of  regret  and  complaint.     Though  it  might  be  impolitic  to  check  the  efflux  by 
authoritative  measures,  it  should  at  least  not  be  directly  encouraged  and  stimu- 
lated, as  it  really  is,  by  the  financial  system,  which  the  English  ministry  so 
obstinately  persevere  in.     Almost  the  whole  of  the  taxation  is  thrown  immedi- 
ately upon  consumption ;  whilst  the  permanent  sources  of  production  and  the 
clear  rent  they  yield  to  the  idle  proprietor  are  left  untouched.  The  proprietor  has, 
therefore,  an  obvious  interest  in  effecting  his  consumption  where  it  is  least  bur- 
thened  with  taxation;  that  is  to  say,  anywhere  but  in  England.     His  property 
is  protected  gratuitously,  and  the  charge  of  its  protection  defrayed  by  the  pro- 
ductive classes,  who  thus  are  compelled  to  pay  for  the  security  of  other  people's 
property  as  well  as  their  own,  and  are  themselves  unable  to  imitate  their  unpro- 
ductive countrymen,  by  running  away  from  domestic  taxation.     A  more  unjust 
and  discouraging  system  could  not  have  been  devised.      Its   evils   are   daily 
increasing,  and  threaten  the  most  serious  diminution  of  the  national  resources. 
But  the  ministers  neither  see  the  mischief  themselves,  nor  will  listen  to  tho 
warnings  of  others.    Many  of  them,  indeed,  have  an  interest  in  perpetuating  an 
exemption,  by  which  they  benefit  personally.     T. 


216  ON  PRODUCTION.  BOOK  I 

of  a  proportionate  extension  of  territory ;  to  say  nothing  of  what  is 
gained  in  a  moral  estimate,  if  the  emigrant  bring  with  him  private 
virtue  and  attachment  to  the  place  of  his  adoption.  "  When  Fre- 
derick William  came  into  the  regency,"  says  the  royal  historian  of 
the  house  of  Brandenburgh,  "there  was  in  the  country  no  manufac- 
ture of  hats,  of  stockings,  of  serge,  or  woollen  stuff  of  any  kind. 
Ail  these  commodities  were  derived  from  French  industry.  The 
French  emigrants  introduced  amongst  us  the  making  of  broadcloths, 
baizes  and  lighter  woollens,  of  caps,  of  stockings  wove  in  the  frame, 
of  hats,  of  beaver  and  felt,  as  well  as  dyeing  in  all  its  branches.  Some 
refugees  of  that  nation  established  themselves  in  trade,  and  retailed 
the  products  of  their  industrious  countrymen.  Berlin  soon  could 
boast  of  its  goldsmiths,  jewellers,  watch-makers,  and  carvers ;  those 
of  the  emigrants,  that  settled  in  the  low  country,  introduced  the 
cultivation  of  tobacco,  and  of  garden  fruits  and  vegetables,  and  by 
their  exertions  converted  the  sandy  tract  in  the  environs  into  capital 
kitchen-garden  grounds." 

This  emigration  of  industry,  capital,  and  local  attachment,  is  no 
less  a  dead  and  total  loss  to  the  country  thus  abandoned,  than  it  is  a 
clear  gain  to  the  country  affording  an  asylum.  It  was  justly  ob- 
served by  Christina,  queen  of  Sweden,  upon  the  revocation  of  the 
edict  of  Nantes,  that  Louis  XIV.  had  used  his  right  hand  to  cut  off 
his  left. 

Nor  can  the  calamity  be  prevented  by  any  measures  of  legal 
coercion.  A  fellow-citizen  cannot  be  forcibly  retained,  unless  he 
be  absolutely  incarcerated ;  still  less  can  he  be  prevented  from  ex- 
porting his  movable  property,  if  he  be  so  inclined.  For,  putting 
out  of  the  question  the  channel  of  contraband,  which  can  never  be 
closed  altogether,  he  may  convert  his  effects  into  goods,  whose  ex- 
port is  tolerated  or  even  encouraged,  and  consign,  or  cause  them  to 
be  consigned,  to  some  correspondent  abroad.  This  export  is  a  real 
outgoing  of  value ;  but  how  is  it  possible  for  government  to  ascer- 
tain, that  it  is  intended  to  be  followed  by  no  return  1* 

The  best  mode  of  retaining  and  attracting  mankind  is,  to  treat 
them  with  justice  and  benevolence ;  to  protect  every  one  in  the  en- 
joyment of  the  rights  he  regards  with  the  highest  reverence ;  to 
allow  the  free  disposition  of  person  and  property,  the  liberty  of  con- 
tinuing or  changing  his  residence,  of  speaking,  reading,  and  writing 
in  perfect  security. 

Having  thus  investigated  the  means  of  production,  and  pointed 
out  the  circumstances,  that  render  their  agency  more  or  less  prolific, 

*In  179C,  when  the  new  authorities  of  France  indemnified  the  holders  of 
suppressed  offices  in  paper-money,  these  discarded  functionaries  for  the  most 
part  converted  their  assignats  into  specie,  or  other  commodities  of  equal  value, 
which  they  took  or  sent  out  of  the  country.  The  consequent  national  loss  to 
France  was  nearly  as  great,  as  if  they  had  received  their  indemnities  in  casli ; 
tor  its  paper  representative  had  not  then  suffered  any  material  depreciation. 
Even  when  the  individual  remains  himself  in  the  country,  he  can  not  be  pre- 
vented from  transferring  his  fortune  thence,  if  he  be  determined  on  so  doing. 


CHAP.  XXI.  ON  PRODUCTION. 


217 


it  would  be  endless,  as  well  as  foreign  to  my  subject,  to  attempt  a 
general  review  of  all  the  various  products  that  compose  the  wealth 
of  mankind :  such  a  task  would  furnish  materials  for  many  distinct 
treatises.  But  there  is  one  amongst  these  products,  the  uses  and 
nature  of  which  are  very  imperfectly  known,  although  the  know- 
ledge of  them  would  throw  much  light  upon  the  matter  now  under 
discussion:  for  which  reason  I  have  determined,  before  the  conclu- 
sion of  this  part  of  my  work,  to  give  a  separate  consideration  to  the 
product  money,  which  acts  so  prominent  a  part  in  the  business  of 
production,  in  the  character  of  the  principal  agent  of  exchange  andj 
transfer. 


CHAPTER  XXI. 

OF  THE  NATURE  AND  USES  OF  MONEY. 

SECTION  L 
General  Remarks. 

IN  a  society  ever  so  little  advanced  in  civilization,  no  single  in- 
dividual produces  all  that  is  necessary  to  satisfy  his  own  wants ;  and 
it  is  rarely  that  an  individual,  by  his  single  exertion,  creates  even 
any  single  product ;  but  even  if  he  does,  his  wants  are  not  limited  to 
that  single  article ;  they  are  numerous  and  various,  and  he  must, 
therefore,  procure  all  other  objects  of  his  personal  consumption,  by 
exchanging  the  overplus  of  the  single  product  he  himself  creates  be- 
yond his  own  wants,  for  such  other  products  as  he  stands  in  need  of. 
And,  by  the  way,  it  is  observable,  that,  since  individual  producers, 
in  every  line,  keep  for  their  own  use  but  a  very  small  part  of  their 
own  products;  the  gardener,  of  the  vegetables  he  raises,  the  bakec 
of  the  bread  he  bakes,  the  shoemaker,  of  the  shoes  he  makes,  and  so 
of  all  others ;  the  great  bulk,  nay,  almost  the  whole  of  the  products 
of  every  community,  arrive  at  consumption  by  the  medium  of  ex- 
change. 

This  is  the  reason,  why  it  has  been  erroneously  concluded,  that 
exchange  and  transfer  are  the  basis  and  origin  of  the  production  of 
wealth,  and  of  commerce  in  particular;  whereas  they  are  only 
secondary  and  accessory  circumstances ;  inasmuch  as,  were  each 
family  to  raise  the  whole  of  the  objects  of  its  own  consumption,  as 
we  see  practised  in  some  instances  in  the  back  settlements  of  the 
United  States,  society  might  continue  to  exist,. without  a  single  act 
of  exchange  or  transfer.  I  make  this  remark,  merely  with  a  view 
to  correctness  of  first  principles,  without  any  design  to  detract  from 
19  20 


218  ON  PRODUCTION.  BOOK  I 

the  importance  of  exchange  and  transfer  to  the  progressive  advance- 
ment of  production ;  indeed,  I  set  out  with  the  position,  that  they 
are  indispensable  in  an  advanced  stage  of  civilization. 

Admitting,  then,  the  necessity  of  interchange,  let  us  pause  a  mo- 
ment, and  consider,  what  infinite  confusion  and  difficulty  must  arise 
to  all  the  different  component  members  of  society,  who  are  for  the 
most  part  producers  of  but  a  single  article,  or  two  or  three  at  the 
utmost,  but  of  whom  even  the  poorest  is  a  consumer  of  a  vast  num- 
ber of  different  products ;  I  say,  what  difficulty  must  ensue,  were 
every  one  obliged  to  exchange  his  own  products  specifically  for 
those  he  may  want ;  and  were  the  whole  of  this  process  carried  on 
by  a  barter  in  kind.  The  hungry  cutler  must  offer  the  baker  his 
knives  for  bread ;  perhaps,  the  baker  has  knives  enough,  but  wants 
a  coat ;  he  is  willing  to  purchase  one  of  the  tailor  with  his  bread,  but 
the  tailor  wants  not  bread,  but  butcher's  meat ;  and  so  on  to  infinity. 

By  way  of  getting  over  this  difficulty,  the  cutler,  finding  he  can- 
not persuade  the  baker  to  take  an  article  he  does  not  want,  will  use 
his  best  endeavours  to  have  a  commodity  to  offer,  which  the  baker 
will  be  able  readily  to  exchange  again  for  whatever  he  may  happen 
to  need.  If  there  exist  in  the  society  any  specific  commodity  that 
is  in  general  request,  not  merely  on  account  of  its  inherent  utility, 
but  likewise  on  account  of  the  readiness  with  which  it  is  received  in 
exchange  for  the  necessary  articles  of  consumption,  and  the  facility 
of  proportionate  subdivision,  that  commodity  is  precisely  what  the 
cutler  will  try  to  barter  his  knives  for ;  because  he  has  learnt  from 
experience,  that  its  possession  will  procure  him  without  any  diffi- 
culty, by  a  second  act  of  exchange,  bread  or  any  other  article  he  may 
wish  for. 

Now,  money  is  precisely  that  commodity. 

The  two  qualities,  that  give  a  general  preference  of  value,  in  the 
shape  of  the  current  money  of  the  country,  to  the  same  amount  of 
value  in  any  other  shape,  are : — 

1.  The  aptitude,  in  the  character  of  an  intermedial  object  of  ex- 
change, to  help  all  who  have  any  exchange  or  any  purchase  to  make, 
that  is  to  say,  every  member  of  the  community,  towards  the  specific 
object  of  desire.     The  general  confidence,  that  money  is  a  com- 
modity acceptable  to  every  body,  inspires  the  assurance  of  being 
able,  by  one  act  of  exchange  only,  to  procure  the  immediate  object 
of  desire,  whatever  it  may  be ;  whereas,  the  possessor  of  any  othei 
commodity  can  never  be  sure  that  it  will  be  acceptable  to  the  pos- 
sessor of  that  particular  object  of  desire. 

2.  The  capability  of  subdivision  and  precise  apportionment  to  tha 
amount  of  the  intended  purchase;    which  capability  is  a  recom- 
mendation to  all  who  have  purchases  to  make ;  in  other  words,  to 
every  member  of  the  community.     Every  one  is,  therefore,  anxious 
to  barter  for  money  the  product  whereof  he  holds  a  superfluity,  and 
which  is  commonly  that  he  himself  produces ;  because,  in  addition 
i"  the  other  quality  above  stated,  he  feels  sure  of  being  able  to  buy 
witn  its  value  in  that  shape  is  small  or  as  large  a  portion  of  cor- 


CHAP.  XXI.  ON  PRODUCTION.  219 

responding  value,  as  he  may  require ;  and  because  he  may  buy, 
whenever,  and  wherever  he  pleases,  such  objects  as  he  may  desire 
to  have  in  lieu  of  the  product  he  has  sold  originally. 

In  a  very  advanced  stage  of  civilization,  when  individual  wants 
have  become  various  and  numerous,  and  productive  operations  very 
much  subdivided,  exchanges  become  a  matter  of  more  urgent  neces- 
sity, as  well  as  much  more  frequent  and  more  complicated ;  and 
personal  consumption  and  barter  in  kind  becomes  less  practicable. 
For  instance,  if  a  man  makes  not  the  whole  knife,  but  the  handle  of 
it  only,  as  in  fact  is  the  case  in  towns  where  cutlery  is  conducted  oa 
a  large  scale,  he  does  not  produce  any  thing  that  he  can  turn  to  ac- 
count ;  for  what  could  he  do  with  the  handle  without  the  blade  1  He 
can  not  himself  consume  the  smallest  part  of  his  own  product,  but 
must  unavoidably  exchange  the  whole  of  it  for  the  necessaries  or 
conveniences  of  life,  for  bread,  meat,  linen,  &c.  But  neither  baker, 
butcher,  nor  weaver,  can  ever  stand  in  need  of  an  article,  that  is  fit 
for  nobody  but  the  finishing  cutler,  who  can  not  himself  give  either 
bread  or  meat  in  exchange ;  because  he  produces  neither ;  and  who 
must,  therefore,  give  some  one  commodity,  that,  by  the  custom  of 
the  country,  may  be  expected  to  pass  currently  in  exchange  for  most 
others. 

Thus,  money  is  the  more  requisite,  the  more  civilized  a  nation  is, 
and  the  further  it  has  carried  the  division  of  labour,  (a)  Yet  history 
contains  precedents  of  considerable  states,  in  which  the  use  of  any 
specific  article,  as  money,  was  utterly  unknown ;  as  we  are  told  it 
was  among  the  Mexicans  at  the  time  of  the  discovery.  We  are  in- 
formed, that,  just  about  the  period  of  their  conquest  by  the  Spanish 
adventurers,  they  were  beginning  to  employ  grains  of  cacao  as 
money,  in  the  smaller  transactions  of  commerce.* 

I  have  referred  to  custom,  and  not  to  the  authority  of  govern- 
ment, the  choice  of  the  particular  article  that  is  to  act  as  money  in 
preference  to  every  other :  for  though  a  government  may  coin  what 
it  pleases  to  call  crowns,  it  does  not  oblige  the  subject  to  give  his 
goods  in  exchange  for  these  crowns,  at  least  not  where  property  is 
at  all  respected.  Nor  is  it  the  mere  impression,  that  makes  people 
consent  to  take  this  coin  in  exchange  for  other  products.  Money 
passes  current  like  any  other  commodity ;  and  people  may  at  liberty 
barter  one  article  for  another  in  kind,  or  for  gold  in  bars,  or  silver 
bullion.  The  sole  reason  why  a  man  elects  to  receive  the  coin  in 
preference  to  every  other  article,  is,  because  he  has  learnt  from  ex- 

*  Raynal,  Hist.  phil.  et  pol.  lib.  vi. 

(a)  The  utility  of  money  is  intense,  in  the  compound  ratio  of  the  division  of 
labour  and  the  variety  of  individual  consumption.  A  sugar  colony  in  the  West 
Indies,  though  highly  productive  in  proportion  to  its  population,  requires  little 
money  to  facilitate  the  transfer  of  the  produce;  because  the  bulk  of  the  population, 
the  iicoroes,  have  very  little  variety  of  consumption  :  they  are  fed,  clothed,  &c. 
in  the  wholesale,  and  in  the  plainest  and  most  uniform  manner.  Yet,  possibly, 
the  division  both  of  agricultural  and  manufacturing  labour  on  each  plantation 
may  be  carried  to  considerable  length.  T. 


220  ON  PRODUCTION.  BOOK  I. 

perience,  that  it  is  preferred  by  those  whose  products  he  has  occa- 
sion to  purchase.  Crown  pieces  derive  their  circulation  as  money 
from  no  other  authority  than  this  spontaneous  preference :  and  if 
there  were  the  least  ground  for  supposing,  that  any  other  commodity, 
as  wheat,  for  instance,  would  pass  more  currently  in  exchange  for 
what  they  calculate  upon  wanting  themselves,  people  would  not  give 
their  goods  for  crown  pieces,  but  would  demand  wheat,  which  would 
then  be  invested  with  all  the  properties'  of  money.  And  this  has 
occurred  occasionally  in  practice,  where  the  authorized  or  govern- 
ment money  has  consisted  of  paper  destitute  of  credit  or  public 
confidence. 

Custom,  therefore,  and  not  the  mandate  of  authority,  designates 
the  specific  product  that  shall  pass  exclusively  as  money,  whether 
crown  pieces  or  any  other  commodity  whatever.* 

The  more  frequent  recurrence  of  the  exchange  of  every  individual 
product  for  the  commodity,  money,  than  for  any  other  product,  has 
attached  particular  names  to  this  transaction ;  thus,  to  receive  money 
in  exchange  is  called,  selling,  and  to  give  it,  buying. 

In  this  way  originated  the  use  of  money.  These  positions  are  by 
no  means  purely  speculative ;  for  on  them  must  all  arguments,  and 
laws,  and  regulations,  on  the  subject  of  money,  be  grounded.  A 
system  built  upon  any  other  foundation  can  possess  neither  beauty 
nor  solidity,  and  must  fail  to  fulfil  the  object  of  its  construction. 

With  the  view  of  throwing  the  utmost  possible  light  upon  the 
essential  properties  of  money,  and  the  principal  contingencies  it  is 
subject  to,  I  shall  treat  of  these  particulars  in  separate  sections,  and 
endeavour  to  enable  such  as  may  give  me  their  attention,  to  follow 
with  ease  the  chain  of  connexion,  notwithstanding  that  classification ; 
and  themselves  to  arrange  in  orte  comprehensive  view  the  whole 
play  of  the  mechanism,  and  the  causes  of  that  derangement,  which 
human  folly  or  misfortune  may  occasionally  effect. 

SECTION  II. 
Of  the  Material  of  Money. 

If,  as  it  would  appear  by  the  reasoning  in  the  preceding  section, 
money  be  'employed  as  a  mere  intermedial  object  of  exchange  be- 

*  When  the  intercourse  between  the  Europeans  and  the  negroes  of  the  river 
Gambia  first  commenced,  the  commodity  most  in  request  with  them  was  iron, 
for  the  purposes  of  war  and  of  tillage.  Iron,  therefore,  became  the  standard  of 
comparison  of  value.  In  a  little  time,  it  became  a  mere  nominal  standard  in 
their  mercantile  dealings ;  and  a  bar  of  tobacco  consisting  of  20  or  30  leaves  of 
that  herb,  was  given  for  a  bar  of  rum  consisting  of  four  or  five  pints,  according 
to  the  abundance  or  scarcity  of  the  article.  In  such  a  state  of  society,  each 
product  successively  performs  the  functions  of  money  in  reference  to  all  other 
products ;  which  leaves  the  community  subject  to  all  the  inconveniences  of  bar- 
ter in  kind,  the  chief  of  which  is,  the  inability  to  ofler  any  one  article  in  genera] 
request  and  acceptation,  and  capable  of  ready  apportionment  in  amount  to  other 
commodities  at  large.  Vide  Travels  of  Mungo  Park,  vol.  i.  c.  2. 


CHAP.  XXL  ON  PRODUCTION. 


221 


tween  an  object  in  possession  and  the  object  of  desire,  the  choice  of 
its  material  is  of  no  great  importance.  Money  is  not  desired  as  an 
object  of  food,  of  household  use,  or  of  personal  covering,  but  for  the 
purpose  of  re-sale,  as  it  were,  and  re-exchange  for  some  object  of 
utility,  after  having  been  originally  received  in  exchange  for  one 
such  already.  Money  is,  therefore,  not  an  object  of  consumption ; 
it  passes  through  the  hands  without  sensible  diminution  or  injury ; 
and  may  perform  its  office  equally  well,  whether  its  material  be  gold 
or  silver,  leather  or  paper. 

Yet,  to  enable  it  to  execute  its  functions,  it  must  of  necessity  be 
possessed  of  inherent  and  positive  value ;  for  no  man  will  be  content 
to  resign  an  object  possessed  of  value,  in  exchange  for  another  of 
less  value,  or  of  none  at  all. 

There  are  some  other  less  essential  requisites,  which  add  to  its 
efficiency.  A  material,  wherein  these  are  not  combined,  is  unfit  for 
the  purpose,  and  cannot  hope  to  engross  its  functions  either  generally 
or  permanently. 

We  are  told  by  Homer,  that  the  armour  of  Diomede  had  cost 
nine  oxen.  A  warrior,  that  wished  to  arm  himself  at  half  the  price, 
must  have  been  puzzled  to  pay  four  oxen  and  a  half.  Wherefore, 
the  article  employed  as  money  must  be  capable  of  being  readily 
and  without  injury  apportioned  to  the  different  objects  of  desire, 
and  subdivided  in  such  manner,  as  to  admit  of  exchanges  of  the 
exact  amount  required. 

Again,  we  read,  that  in  Abyssinia,  they  make  use  of  salt  for 
money.  If  the  same  custom  prevailed  in  France,  a  man  must  take 
a  mountain  of  salt  to  market  to  pay  for  his  weekly  provisions. 
Wherefore,  the  commodity  employed  as  money  must  not  be  so 
abundant,  as  to  make  it  necessary  to  transfer  a  large  quantity,  on 
each  recurring  act  of  exchange. 

At  Newfoundland,  it  is  said,  that  dried  cod  performs  the  office  of 
money,  and  Smith  makes  mention  of  a  village  in  Scotland,  where 
nails  are  made  use  of  for  that  purpose.*  Besides  many  other  incon- 
veniences, that  substances  of  this  nature  are  subject  to,  there  is  this 
grand  objection,  that  the  quantity  may  be  enlarged  almost  at  plea- 
sure, and  in  a  very  short  space  of  time,  and  thereby  a  vast  fluctuation 
effected  in  their  relative  value.  But  who  would  readily  accept  in 
exchange  an  article,  that  might,  perhaps,  in  a  few  moments,  lose  the 
half  or  three-fourths  of  its  value  ?  Wherefore,  the  commodity  em- 
ployed as  money  must  be  of  such  difficult  acquisition,  as  to  ensure 
those  who  take  it,  from  the  danger  of  sudden  depreciation. 

In  the  Maldive  islands,  and  in  some  parts  of  India  and  Africa, 
shells,  called  cowries,  are  employed  as  money,  although  they  have 
no  intrinsic  value,  except  that  they  serve  for  ornament  to  some  rude 
tribes.  This  kind  of  money  would  never  do  for  nations  that  carry 
on  trade  with  many  parts  of  the  globe ;  a  medium  of  exchange?  oi 
such  very  limited  circulation  would  offer  insuperable  objections.  It 

*  Wealth  of  Nations,  book  i.  c.  4. 
19* 


222  ON  PRODUCTION.  BOOK  I 

is  natural  for  people  to  receive  most  willingly  in  exchange  that  arti- 
cle, which  is  the  most  universally  received  in  like  manner  by  othei 
people  in  their  turn. 

We  need  not,  then,  be  surprised,  that  almost  all  the  commercial 
nations  of  the  world  should  have  selected  metal  to  perform  the  office 
of  money ;  when  once  the  more  industrious  and  commercial  com- 
munities had  declared  their  choice,  all  the  rest  had  an  evident  in- 
ducement to  follow  their  example. 

At  times,  when  the  metals  now  most  abundantly  produced  were 
yet  rare,  people  were  content  to  make  use  of  them  for  the  purpose. 
The  legal  currency  of  Lacedaemon  was  of  iron ;  that  of  the  early 
Romans,  of  copper.  In  proportion  as  those  metals  were  extracted 
from  the  earth  in  greater  quantity,  they  became  liable  to  the  objec- 
tion above  stated  in  respect  to  all  products  of  too  little  comparative* 
value ;  and  it  is  long  since  the  precious  metals,  that  is  to  say,  gold 
and  silver,  have  been  almost  universally  adopted.  To  this  use  they 
are  particularly  applicable : 

1.  As  being  divisible  into  extremely  minute  portions,  and  capable 
of  re-union,  without  any  sensible  loss  of  weight  or  value ;  so  that 
the  quantity  may  be  easily  apportioned  to  the  value  of  the  article  of 
purchase. 

2.  The  precious  metals  have  a  sameness  of  quality  all  over  the 
world.     One  grain  of  pure  gold  is  exactly  similar  to  another,  whe- 
ther it  came  from  the  mines  of  Europe  or  America,  or  from  the 
sands  of  Africa.     Time,  weather,  and  damp,  have  no  power  to  alter 
the  quality :  the  relative  weight  of  any  specific  portion,  therefore, 
determines  at  once  its  relative  quality  and  value  to  every  other 
portion :  two  grains  of  gold  are  worth  exactly  twice  as  much  as  one. 

3.  Gold  and  silver,  especially  with  the  mixture  of  alloy,  that  they 
admit  of,  are  hard  enough  to  resist  very  considerable  friction,  and 
are  therefore  fitted  for  rapid  circulation,  though,  indeed,  in  this  re- 
spect, they  are  inferior  to  many  kinds  of  precious  stones. 

4.  Their  rarity  and  consequent  dearness  are  not  so  great  that  the 
quantity  of  gold  or  of  silver,  equivalent  to  the  generality  of  goods, 
is  too  minute  for  ordinary  perception ;  nor,  on  the  other  hand,  are 
they  so  abundant  and  cheap,  as  to  make  a  large  value  amount  to  a 
great  weight.     It  is  possible,  that  in  progress  of  time,  they  may  be- 
come liable  to  objection  on  this  score ;  especially  if  new  and  rich 
veins  of  ore  should  be  discovered :  and  then  mankind  must  have 
recourse  to  platina,  or  some  other  yet  unknown  metal,  for  the  pur- 
pose of  currency. 

Lastly,  gold  and  silver  are  capable  of  receiving  a  stamp  or  impres- 
sion, certifying  the  weight  of  the  piece,  and  the  degree  of  its  purity. 

*The  money  of  Lacedsemon  is  a  proof  of  the  position,  that  public  authority 
is  incompetent  of  itself  to  give  currency  to  its  money.  The  laws  of  Lycurgus 
directed  the  money  to  be  made  of  iron,  purposely  to  prevent  its  being  easily 
hoarded,  or  transferred  in  large  quantities ;  but  they  were  inoperative,  because 
they  went  to  defeat  these,  the  principal  purposes  of  money.  Yet  no  legislator 
was  ever  more  rigidly  obeyed  than  Lycurgus. 


CHAP.  XXI.  ON  TRODUCTION.  003 

Although  the  precious  metals  used  for  money  have  generally 
some  mixture  of  baser  metal,  generally  of  copper,  by  way  of  alloy, 
the  value  of  the  baser  metal,  thus  incorporated,  is  reckoned  for  no- 
thing. Not  that  the  alloy  is  itself  destitute  of  value;  but  because 
the  operation  of  disuniting  it  from  the  purer  metal  would  cost  more 
than  it  would  be  worth,  after  it  was  extracted.  For  this  reason  a 
piece  of  coined  gold  or  silver,  mixed  with  alloy,  is  estimated  by  the 
quantity  of  precious  metal  only  contained  in  it.* 

*  The  present  silver  coin  of  France  contains  one  part  copper  to  nine  parts 
fine  silver ;  the  relative  value  of  copper  to  silver  being  as  1  to  60,  or  thereabouts. 
So  that  the  copper  contained  in  the  whole  silver  coinage,  amounts  to  about 
•gbf  of  the  total  value  of  the  silver  coin,  or  1  cent  in  6  fr.  Supposing  it  were 
attempted  to  disengage  the  copper,  it  would  not  pay  the  expenses  of  the  process 
of  separation ;  to  say  nothing  of  the  value  of  the  impression  that  must  be 
destroyed.  Wherefore,  it  is  reckoned  for  nothing  in  the  valuation  of  the  coin. 
A  piece  of  5  fr.  presents  the  idea  of  the  22£  grammes  of  fine  silver  contained 
in  it,  though  actually  weighing  25  gr.  inclusive  of  the  alloy.  (1) 

(1)  The  values  of  the  gold,  silver,  and  copper  coins  of  the  United  States, 
were  first  regulated  by  the  act  of  Congress  of  the  2d  of  April,  1792,  establish- 
ing the  mint.  By  that  act,  the  eagle  contained  247.5  grains  of  pure  gold  and 
22.5  grains  of  alloy,  making  together  270  grains  of  standard  gold ;  and  the 
half  eagle  and  the  quarter  eagle,  their  respective  fractional  proportions  of  the 
same  metals.  By  the  act  of  Congress  of  the  30th  of  June,  1834,  this  standard 
has  been  debased,  and  the  weight  of  the  gold  coins  reduced:  the  eagle  now 
contains  232  grains  of  pure  gold  and  26  grains  of  alloy,  making  together  258 
grains  of  standard  gold ;  a.nd  the  half  eagle  and  the  quarter  eagle  are  reduced 
in  like  proportions.  By  the  act  of  1792,  the  standard  of  gold  was  eleven- 
twelfths  of  pure  gold  to  one-twelfth  of  alloy,  or  22  carats  fine.  By  the  act  of 
the  present  year,  the  relative  fineness  or  number  of  carats  has  been  reduced  to 
about  21.58,  equivalent  to  a  debasement  of  about  1.9  per  cent. ;  and  the  actual 
quantity  of  pure  metal  in  the  coin  has  been  diminished  more  than  6.25  per 
cent — (6.262626+).  The  alloy  of  standard  gold  is  composed  of  silver  and 
copper,  not  exceeding  one  half  silver. 

In  the  silver  coins  of  the  United  States,  no  change  has  been  made,  since  the 
act  of  1792,  which  regulated  their  value.  The  dollar,  by  that  act,  is  made  the 
unit,  of  the  same  value  as  the  Spanish  milled  dollar  then  current.  The  dollar 
of  the  United  States  contains  371.25  grains  of  pure  silver  and  416  grains  of 
standard  silver ;  the  half  dollar  185.625  grains  of  pure  silver  and  208  grains  of 
standard  silver;  the  quarter  dollar  92.8125  grains  of  pure  silver  and  104  grains 
of  standard  silver ;  the  dime  37.125  grains  of  pure  silver  and  41.6  grains  of 
standard  silver;  and  the  half  dime  18.5625  grains  of  pure  silver  and  20.8  grains 
of  standard  silver.  The  standard  of  silver  is  1485  parts  of  fine  to  179  parts 
alloy ;  accordingly,  1485  parts  in  1664  parts  of  the  entire  weight  of  the  silver 
coins  are  of  pure  silver,  and  the  remaining  179  parts  of  alloy.  The  alloy  of 
standard  silver  is  wholly  composed  of  copper. 

The  copper  coins  of  the  United  States  are  the  cent  and  the  half  cent ;  the 
weight  of  which,  since  the  act  of  1792,  has  been  twice  reduced.  By  the  act  of 
1792,  the  cent  contained  264  grains,  and  the  half  cent  132  grains,  of  copper, 
and  the  cent  was  fixed  at  the  value  of  the  hundredth  part  of  the  dollar,  or  unit. 
By  an  act  of  the  14th  of  January,  1793,  the  cent  was  reduced  to  208  grains, 
and  the  half  cent  to  104  grains,  of  copper ;  and  by  an  act  of  the  3d  of  March, 
1795,  the  President  was  authorized  by  proclamation,  and  accordingly,  on  the  26th 
of  January,  1796,  reduced  the  cent  to  168  grains,  and  the  half  cent  to  84  grains 
of  copper,  their  present  weight.  The  proportional  mint  value  of  gold  to  silver, 
by  the  act  of  1792,  was  as  1  of  pure  gold  to  15  of  pure  silver ;  and  by  the  act  of 


224  ON  PRODUCTION.  BOOK  T. 


SECTION  -III. 

Of  the  Accession  of  Value  a  Commodity  receives  by  being  Vested  with 
the  Character  of  Money. 

From  the  foregoing  sections  it  will  appear,  that  money  is  indebted 
for  its  currency,  not  to  the  authority  of  the  government,  but  to  its 
being  a  commodity  bearing  a  peculiar  and  intrinsic  value.  But  its 
preference,  as  an  object  of  exchange,  to  all  other  commodities  of 
equivalent  value,  is  owing  to  its  characteristic  properties  as  money; 
and  to  the  peculiar  advantage  it  derives  from  its  employment  in  that 
character ;  namely,  the  advantage  of  being  in  universal  use  and  re- 
quest. The  whole  population,  from  the  lowest  degree  of  poverty  to 
the  highest  of  wealth,  must  effect  exchanges,  must  buy  the  objects 
of  want;  must  be  consumers  of  money;  or,  in  other  words,  must 
obtain  possession  of  the  commodity,  that  acts  as  the  medium  of  ex- 
change, the  commodity  generally  admitted  to  be  best  suited,  and 
most  frequently  employed  for  that  purpose.  A  man  that  has  any 
other  commodity,  jewels,  for  instance,  to  offer  in  exchange  for  the 
necessaries  or  luxuries  he  may  have  occasion  for,  cannot  get  those 
necessaries  or  luxuries  by  the  process  of  exchange,  until  he  has 
found  a  consumer  for  his  jewels ;  nor  can  he  even  then  be  sure,  that 
such  a  consumer  will  be  able  to  give  him,  in  return,  the  very  identi- 
cal article  he  may  want :  whereas,  a  man,  with  money  in  his  pocket, 
is  quite  certain,  that  it  will  be  acceptable  to  the  person,  of  whom  he 
would  buy  any  thing ;  because  that  person,  will,  in  turn,  be  himself 
obliged  to  become  a  purchaser  in  like  manner.*  With  the  com- 
modity, money,  he  can  obtain  all  he  wants  by  a  single  act  of  ex- 
change only,  called  a  purchase ;  whereas,  with  all  others  two  acts 
at  least  are  necessary ;  a  sale  and  a  purchase.  This  is  the  sum  total 
of  its  advantages  in  the  character  of  money :  but  it  must  be  obvious 
to  every  body,  that  the  preference,  thus  shown  it  as  money,  is  a 
consequence  of  its  actual  use  as  such. 

I  must  here  observe,  that  the  adoption  of  any  specific  commodity 
to  serve  as  money,  considerably  augments  its  intrinsic  value,  or 
value  as  an  article  of  commerce.  A  new  use  being  discovered  for 
the  commodity,  it  unavoidably  becomes  more  in  request;  the  em- 
ployment of  a  great  part,  the  half  or  perhaps  three-fourths  of  the 
whole  stock  of  it  on  hand,  in  this  new  way  cannot  fail  to  render  the 
whole  more  scarce  and  dear,  (a) 

*The  other  property  of  money,  the  capability  of  subdivision,  and  apportion- 
ment of  the  value  parted  with,  must  not  be  lost  sight  of:  by  it  the  jeweller  is 
enabled  to  exchange  a  minute  portion  of  his  precious  commodity  for  the  smallest 
item  of  his  household  expenditure. 

(a)  This  point  has  been  well  observed  upon  by  Turgot.  Reft,  sur  la  Form,  et 
Distrib.  des  Rich. 


the  present  year  the  proportional  mint  value  of  gold  to  silver  is  as  1  of  pure  gold 
!i»  16.002112-f-  of  pure  silver.  AMERICAN  EPITOK. 


CHAP.  XXI.  ON  PRODUCTION.  225 

Were  the  actually  existing  stock  of  silver  and  gold  applied  to 
no  other  use  than  the  fabrication  of  plate  or  ornament,  the  quantity 
would  be  abundant  and  much  cheaper  than  it  is  at  present;  that  is  to 
say,  whenever  they  were  exchanged  for  other  commodities,  more 
of  them  would  be  given  or  received  in  proportion  to  the  value  ob- 
tained in  exchange.  But  a  large  portion  of  these  metals  being 
destined  to  act  as  money,  and  exclusively  occupied  in  that  way, 
there  is  less  remaining  to  be  manufactured  into  jewellery  and  plate, 
and  the  scarcity  of  course  adds  to  the  value.  On  the  other  hand,  if 
they  were  never  used  in  plate  or  jewellery,  there  \vould  be  more  of 
them  applicable  to  the  purpose  of  money,  and  money  would  grow 
cheaper,  that  is  to  say,  more  of  it  would  be  necessary  to  purchase 
an  equal  quantity  of  goods.  The  employment  of  the  precious 
metals  in  manufacture  makes  them  scarcer  and  dearer  as  money; 
in  like  manner  as  their  employment  as  money  makes  them  scarcer 
and  dearer  in  manufacture.* 

Hence  it  naturally  follows,  that  these  metals  being,  by  reason  of 
their  employment  as  money,  raised  'to  such  a  price,  as  precludes 
their  so  general  use  in  the  form  of  plate  and  jewellery,  it  is  in  con- 
sequence found  less  convenient  to  use  them  in  that  form.  The 
luxury  costs  more  than  it  is  worth.  Thus,  massive  gold  plate  has 
gone  completely  out  of  fashion,  particularly  in  those  countries,  where 
the  activity  of 'commerce,  and  the  rapid  progress  of  wealth,  make 
gold  in  great  demand  for  the  purposes  of  money.  The  richest  in- 
dividuals content  themselves  with  gilt  plate,  that  is  to  say,  plate 
covered  with  a  very  thin  coat  of  gold ;  solid  gold  is  used  only  in 
smaller  articles  of  manufacture,  and  those  in  which  the  value  of  the 
workmanship  exceeds  that  of  the  metal.  In  England,  plate  is  made 
very  light,  and  people  of  affluence  often  content  themselves  with 
silver-plated  goods.  The  ostentation  of  displaying  a  large  service 
of  that  metal  costs  the  interest  of  a  considerable  capital. 

The  increase  of  the  value  of  metals  is,  generally  speaking,  at- 
tended with  some  disadvantages;  inasmuch  as  it  places  many  arti- 
cles of  comfort  and  convenience,  silver  dishes,  spoons,  &c.,  beyond 
the  reach  of  most  private  families ;  but  there  is  no  disadvantage  in 
such  increased  value  of  the  metal  in  its  character  of  money ;  on  the 

*Ricardo  and  some  other  writers  maintain,  that  the  charges  of  obtaining  the 
metal  wholly  determine  its  price  or  relative  value  in  exchange  for  all  other  com- 
modities.    According  to  their  notions,  therefore,  the  want  or  demand  nowise 
influences  that  price ;  a  position  in  direct  contradiction  to  daily  and  indisputable 
experience,  which  leads  us  invariably  to  the  conclusion,  that  value  is  increased 
by  increase  of  demand.     Supposing  that,  by  the  discovery  of  new  mines,  siKei 
were  to  become  as  common  as  copper,  it  would  be  subject  to  all  the  disqualifica- 
tions of  copper  for  the  purposes  of  money,  and  gold  would  be  more  generally 
employed.     The  consequent  increase  of  the  demand  for  gold  would  increase  the 
intensity  of  its  value ;  and  mines  would  be  worked,  that  are  now  abandoned,  be 
cause  they  do  not  defray  the  expense.     It  is  true  that  the  ore  would  thoi  be  Ob 
tained  at  a  heavier  rate ;  but  will  any  one  deny,  that  the  increased  value  of  tl 
metal  would  be  owing  to  the  increased  demand  for  it?     It  is  the  increased 
tensity  of  that  demand,  that  determines  the  miner  to  incur  the  mcreasec 
of  production. 

~  1 ' 


226  ON  PRODUCTION.  BOOK  1. 

contrary,  there  is  a  greater  convenience  in  the  transfer  of  a  less 
bulky  commodity,  on  every  change  of  residence,  and  every  act  of 
exchange. 

The  selection  of  any  commodity,  to  act  as  money  in  but  one  part 
of  the  world,  increases  its  value  everywhere  else.  There  is  no 
doubt,  that,  if  silver  should  cease  to  be  current  as  money  in  Asia, 
the  value  of  that  metal  in  Europe  would  be  affected,  and  more  of  it 
would  be  given  in  exchange  for  all  other  commodities;  for  one  use 
of  silver  in  Europe  is,  the  possibility  of  exporting  it  to  Asia. 

The  employment  of  the  precious  metals  as  money  by  no  means 
renders  their  value  stationary ;  they  remain  subject  to  local  as  well 
as  temporary  fluctuations  of  value,  like  every  other  object  of  com- 
merce. In  China,  half  an  ounce  of  silver  will  purchase  as  many 
objects  of  use  or  pleasure  as  an  ounce  in  France ;  and  an  ounce  of 
silver  in  France  will  generally  go  much  farther  in  the  purchase  oi 
commodities,  than  it  will  in  America.  Silver  is  more  valuable  in 
China  than  in  France,  and  in  France  than  in  America. 

Thus  money,  or  specie,  as  some  people  call  it,  is  a  commodity, 
whose  value  is  determined  by  the  same  general  laws,  as  that  of  all 
other  commodities ;  that  is  to  say,  rises  and  falls  in  proportion  to  the 
relative  demand  and  supply.  And  so  intense  is  that  demand,  as  to 
have  sometimes  been  sufficient  to  make  paper,  employed  as  money, 
equal  in  value  to  gold  of  the  same  denomination ;  of  which  the  mo- 
ney of  Great  Britain  is  a  present  example. 

It  must  not  be  imagined,  that  the  paper  money  of  that  country 
derives  its  value  from  the  promise  of  payment  in  specie,  which  it 
purports  to  convey.  That  promise  has  been  held  out  ever  since  the 
suspension  of  cash  payments  by  the  bank  in  1797,  without  any 
attempt  at  performance,  which  many  people  consider  impossible.* 

*  Before  the  Bank  of  England  can  pay  off  its  notes  in  cash,  the  government, 
its  principal  debtor,  must  discharge  its  debts  in  specie ;  which  it  can  not  do  unless 
it  purchase  the  specie,  either  with  its  savings,  or  with  the  proceeds  of  further 
taxation.  In  doing  so,  it  would,  in  effect,  substitute  a  new  and  very  costly  en- 
gine of  circulation,  which  must  be  purchased  by  the  state,  for  the  present  one, 
which,  although  much  out  of  order,  and  altogether  destitute  of  intrinsic  value, 
is  yet  made  to  do  the  business  well  enough.  (1) 

(1)  The  Bank  of  England,  notwithstanding  the  opinion  expressed  by  the  author 
in  this  note,  has  long  since  resumed  and  continued  the  payment  of  its  notes  on 
demand  in  specie ;  and,  it  must  be  added,  without  any  intention  having  be<m 
expressed,  or  attempt  made,  by  the  British  government,  to  "  discharge  its  debts 
in  specie."  which  M.  Say  seemed  here  to  think  must  be  previously  effected. 

By  an  act  of  parliament,  passed  in  July  1819,  generally  known  as  Mr.  Peel's 
Act,  the  Bank  of  England  was  required,  from  the  1st  of  May,  1823,  to  pay  its 
notes  on  demand,  in  the  legal  coins  of  the  realm.  The  final  resumption  of  cash 
payments  by  the  Bank  of  England  took  place,  however,  at  a  still  earlier  period  ; 
for,  finding  itself  in  possession  of  sufficient  gold  to  make  payments  in  cash  sooner 
than  this  iaw  prescribed,  the  bank  obtained  the  passage  of  another  act,  which 
made  it  imperative  upon  the  institution  to  pay  all  demands  in  the  legal  coin  of 
the  realm  on  the  1st  of  May,  1822,  since  which  time  it  has  never  ceased  to 
"  discharge  its  debts  in  specie  "  when  required. 

AMERICAN  EDITOR. 


CHAP.  XXI.  ON  PRODUCTION.  227 

Gold  is  only  procurable  piecemeal,  and  by  payment  of  an  agio  or 
per  centage  ;  in  other  words,  by  giving  a  larger  amount  in  paper  for 
a  smaller  amount  in  gold.  Yet  the  paper,  though  depreciated,  is 
invested  with  value  far  exceeding  that  of  its'"  flimsy  material. 
Whence,  then,  is  that  value  derived  1  From  the  urgent  want,  in  a 
very  advanced  stage  of  society  and  of  industry,  of  some  agent  01 
medium  of  exchange.  England,  in  its  actual  state,  requires,  for  the 
effectuation  of  its  sales  and  purchases,  an  agent  or  medium  equal  in 
value,  say  to  1,284,000  Ibs.  weight  of  gold;  or,  what  is  the  same 
thing,  to  1,200,000,000  Ibs.  weight  of  sugar;  or,  what  is  still  the 
same  thing,  to  60,000,000/.  sterling  of  paper,  taking  the  Bank  of 
England  paper  at  30  millions,  and  the  paper  of  the  country  banks 
at  as  much  more,  (a)  This  is  the  reason,  why  the  60  millions  of 
paper,  though  destitute  of  intrinsic  value,  are,  by  the  mere  want  of 
a  medium  of  exchange,  made  equal  in  value  to  1,284,000  Ibs.  weight 
of  gold,  or  1,200,000,000  Ibs.  weight  of  sugar. 

As  a  proof  that  this  paper  has  a  peculiar  and  inherent  value, 
when  its  credit  was  the  same  as  at  present,  and  its  volume  or  nominal 
amount  was  enlarged,  its  value  fell  in  proportion  to  the  enlargement, 
just  like  that  of  any  other  commodity.  And,  as  all  other  commodi- 
ties rose  in  price,  in  proportion  to  the  depreciation  of  the  paper,  its 
total  value  never  exceeded  the  same  amount  of  1,284,000  Ibs.  weight 
of  gold,  or,  1,200,000,000  Ibs.  weight  of  sugar.  Why?  Because  the 
business  of  circulating  all  the  values  of  England  required  no  largei 
value.  No  government  has  the  power  of  increasing  the  total  national 
money  otherwise  than  nominally.  The  increased  quantity  of  the 
whole  reduces  the  value  of  every  part ;  and  vice  versa.* 

Since  the  national  money,  whatever  be  its  material,  must  have  a 
peculiar  and  inherent  value,  originating  in  its  employment  in  that 
character,  it  forms  an  item  of  national  wealth,  in  the  same  manner 
as  sugar,  indigo,  wheat,  and  all  the  other  commodities  that  the  nation 
may  happen  to  possess.f  It  fluctuates  in  value  like  other  commodi- 

*  For  the  consequence  of  an  excessive  issue  of  paper-money,  vide  infrd,  Chap. 
XXII.  sect.  4.  where  the  subject  of  paper-money  is  discussed. 

f  The  multiplication  of  paper-money,  and  its  consequent  depreciation,  eifects 
no  augmentation  of  the  wealth  of  the  community,  although  it  makes  necessary  a 
more  liberal  use  of  figures  in  the  estimation ;  just  in  the  same  way  as  its  valua- 
tion in  wheat  instead  of  silver  would  do.  The  total  of  national  wealth  might  be 
20,000,000,000  kilogr.  of  wheat,  and  but  25,000,000  kilogr.  of  silver,  and  yet  the 
value  precisely  the  same.  If  the  value  of  the  money  be  less  intense,  it  will  ro- 
quire  more  of  it  to  express  the  same  degree  of  value. 

(a)  It  must  not  be  supposed,  that  our  author  is  ignorant  of  the  wide  difference 
between  Bank  of  England  and  country  bank  paper,  viz :  that  the  onp  is  paper- 
money,  the  principal ;  the  other,  its  convertible  representative.  This  position 
is  perfectly  correct.  The  credit,  embodied,  as  it  were,  in  the  provincial  paper, 
is  equally  an  agent  of  circulation  with  the  inconvertible  principal,  the  paper- 
me  ey ;  which,  but  for  its  presence  and  rivalry,  would  be  required  in  double  the 
quantity,  to  maintain  the  same  scale  of  money-prices.  Great  confusion  has 
hitherto  prevailed  on  this  subject  for  want  of  a  clear  conception  of  the  concurrent 
operation  of  coin  and  its  rival,  credit.  T. 


228  ON  PRODUCTION.  BOOK  I. 

ties;  and  like  them,  too,  is  consumed,  though  less  rapidly  than  most 
of  them.  Wherefore,  it  would  be  wrong  to  subscribe  to  the  opinion 
of  Gamier,  (a)  who  lays  it  down  as  a  maxim,  that,  "  so  long  as  sil- 
ver remains  in  the  shape  of  money,  it  i-s  not  an  item  of  actual  wealth 
in  the  strict  sense  of  the  word ;  for  it  does  not  directly  and  imme- 
diately satisfy  a  want  or  procure  an  enjoyment."  There  are  abun- 
dance of  values  incapable  of  satisfying  a  want,  or  procuring  an 
enjoyment,  in  their  present  existing  shape.  A  merchant  may  have 
his  warehouse  full  of  indigo,  which  is  of  no  use  in  its  actual  state, 
either  as  food  or  as  clothing;  yet  it  is  nevertheless  an  item  of 
wealth,  and  one  that  can  be  converted,  at  will,  into  another  value  fit 
for  immediate  use.  Silver,  in  the  shape  of  crown  pieces,  is,  there- 
fore, equally  an  article  of  wealth  with  indigo  in  chests.  Besides,  is 
not  the  utility  of  money  an  object  of  desire  in  civilized  society? 

Indeed,  the  same  writer  elsewhere  admits  that,  "  specie  in  the 
coffers  of  an  individual  is  real  wealth,  an  integral  part  of  his  sub- 
stance, which  he  may  immediately  devote  to  his  personal  enjoy- 
ment; although,  in  the  eye  of  political  economy,  this  same  coin  is  a 
mere  instrument  of  exchange,  essentially  differing  from  the  wealth 
it  helps  to  circulate."*  I  hope  what  I  have  said  is  quite  sufficient 
to  show  the  complete  analogy  of  specie  to  all  other  items  of  "wealth- 
Whatever  is  wealth  to  an  individual,  is  wealth  to  the  nation,  which 
is  but  an  aggregate  of  many  individuals;  and  is  wealth  also  in  the 
eye  of  political  economy,  which  must  not  be  misled  by  the  notion 
of  imaginary  value,  or  regard  as  value  any  thing,  but  what  all  the 
members  of  the  community,  individually,  as  well  as  jointly,  treat  as 
value,  not  nominal,  but  actual.  And  this  is  one  proof  more,  thai 
there  are  not  two  kinds  of  truth  in  this,  more  than  in  any  other 
science.  What  is  true  in  relation  to  an  individual,  is  true  in  rela- 
tion to  the  government,  and  to  the  community.  Truth  is  uniform; 
in  the  application  only  can  there  be  any  variety. 


SECTION  IV. 
Of  the  Utility  of  Coinage,  and  of  the  Charge  of  its  Execution. 

No  mention  has  hitherto  been  made  of  the  value  that  money 
derives  from  the  impression  and  coinage.  I  have  merely  pointed 
out  the  various  utility  of  gold  and  silver  as  articles  of  commerce, 
wherein  originates  their  value ;  and  considered  their  fitness  to  act 
as  money,  as  part  of  that  utility. 

Wherever  gold  and  silver  act  as  money,  they  must  of  course  be 
constantly  passing  from  hand  to  hand.  Most  people  buy  or  sell 

*  kbrege  des  Principes  cTEconomie  Publique,  Ire  partie,  c.  4,  and  the  ad 
vertmement  prefixed. 

(a)  Garmer  de  Saintes,  translator  of  the  Wealth  of  Nations. 


CHAP.  XXI.  ON  PRODUCTION.  229 

several  times  a  day ;  judge,  then,  what  inconvenience  must  ensur, 
were  it  necessary  to  be  always  provided  with  scales  to  weigh  the 
money  paid  or  received;  and  what  infinite  blunders  and  disputes 
must  arise  from  awkwardness  or  defective  implements.  Nor  is  this 
all ;  gold  and  silver  can  be  compounded  with  other  metals  without 
any  visible  alteration.  The  degree  of  purity  can  not  be  exactly 
ascertained,  without  a  delicate  and  complex  chemical  process.  The 
transactions  of  excharge  are  wonderfully  facilitated,  when  the  weight 
and  standard  of  each  piece  of  money  are  denoted  by  an  impression, 
that  nobody  can  mistake. 

Metals  are  reduced  to  an  established  standard,  and  divided  into 
pieces  of  an  established  weight,  by  the  art  of  coining. 

The  government  of  each  state  usually  reserves  to  itself  the  exclu- 
sive exercise  of  this  branch  of  manufacture ;  whether  with  a  view 
of  gaining  somewhat  more  by  the  monopoly,  than  it  could,  if  every 
body  were  at  liberty  to  practise  it,  or  to  hold  out  to  the  subjects  a 
more  solid  security,  than  any  private  manufacturer  could  offer,  which 
is  more  frequently  the  motive.  In  fact,  though  governments  have 
too  often  broken  faith  in  this  particular,  their  guarantee  is  still  pre- 
ferred by  the  people  to  that  of  individuals,  both  for  the  sake  of 
uniformity  in  the  coin,  and  because  there  would  probably  be  more 
difficulty  in  detecting  the  frauds  of  private  issuers. 

The  coinage  unquestionably  adds  a  value  to  the  metal  coined ;  that 
is  to  say,  a  lump  of  silver,  wrought  into  a  dollar,  is  better  than  an 
equal  weight  of  bullion  of  like  standard ;  and  for  a  very  simple  rea- 
son. The  fashion  given  to  the  metal  saves  the  person,  that  takes  it 
in  course  of  exchange,  all  the  charges  of  weighing  and  assaying, 
among  which  the  loss  of  time  and  labour  must  be  reckoned;  just  in 
the  same  manner  as  a  coat  ready  made  is  worth  more  than  the 
materials  it  is  to  be  made  of.  Even  if  the  business  of  coining  were 
open  to  all  the  world,  and  government  confined  itself  to  fixing  the 
standard,  the  weight,  and  the  impression,  that  each  piece  should 
possess,  still  the  holders  of  bullion  would  find  it  answer  to  pay  a 
premium  to  the  coiner,  for  coining  their  bullion  into  money;  other- 
wise, they  would  have  some  difficulty  in  effecting  an  exchange,  and 
would,  perhaps,  lose  more  on  the  exchange,  than  it  would  cost  to 
have  the  bullion  converted  into  coin. 

But  the  additional  value,  thus  communicated  to  the  precious 
metals  by  the  coinage,  must  not  be  confounded  with  that,  which 
bullion,  as  an  article  of  trade,  receives  from  the  circumstance  of  its 
employment  as  money.  The  latter  value  attaches  to  the  whole  stock 
of  gold  and  silver  in  existence ;  a  silver  tankard  is  of  greater  value, 
because  that  metal  is  employed  as  money,  whereas,  the  additional 
value  accruing  from  the  coinage  is  peculiar  to  the  specific  portion 
coined,  exactly  as  its  fashion  is  peculiar  to  the  goblet ;  and  is  wholly 
independent  of  the  value,  that  the  commodity,  silver,  derives  iron 
its  various  utility. 

In  England,  the  whole  expense  of  coinage  is  defrayed  by  the 
government ;  the  same  weight  of  guineas  is  delivered  at  the  mint  in 
20 


^30  ON  PRODUCTION.  BOOK  L 

return  for  a  like  weight  of  bullion  of  the  legal  standard.  The 
nation,  in  quality  of  consumer  of  money,  is  gratuitously  presented 
with  the  charges  of  coining,  which  are  levied  by  taxation  upon  them 
in  their  other  character  of  payers  of  taxes.  Yet  gold,  in  the  shape 
of  guineas,  has  an  evideni,  advantage  over  bullion;  not  that  of  being 
ready  weighed,  for  people  are  often  at  the  pains  of  re-weighing,  but 
that  of  being  ready  assayed.  Consequently,  it  has  happened  some- 
times, that  bullion  has  been  carried  to  the  mint,  not  to  be  converted 
into  coin,  but  merely  to  have  the  standard  ascertained,  and  certified 
to  the  foreign  or  domestic  purchaser,  (a)  For  guineas  are  a  better 
article  of  export  than  bullion,  inasmuch  as  bullion,  bearing  the  cer- 
tificate of  assay,  is  preferable  to  bullion  without  any  such  certificate. 
On  the  contrary,  for  the  purposes  of  importation  into  England,  gold 
bullion  answers  every  purpose  of  guineas  ready  coined,  and  is  of 
just  the  same  value,  weight  and  standard  being  alike ;  for  the  mint 
makes  no  charge  for  converting  the  bullion  into  coin.  Foreigners 
have,  in  fact,  an  object  in  keeping  back  the  guineas,  which  have 
already  received  the  certificate  of  assay,  and  remitting  bullion  to 
England  to  obtain  a  like  gratuitous  certificate.  This  system,  there- 
fore, makes 'it  an  object  to  export  the  coined  metal,  but  holds  out  no 
encouragement  to  its  reimportation.* 

The  mischief  is  somewhat  palliated  by  an  accidental  circumstance, 
which  never  entered  into  the  calculation  of  the  legislature.'  There 
is  no  other  mint  in  England,  but  that  of  the  metropolis,  which  is  so 
completely  overloaded  with  business,  that  it  can  not  re-deliver  the 

*  It  is  hardly  necessary  to  repeat,  that  the  specie  exported  is  not  so  much 
value  lost  to  the  community ;  for  nobody  will  feel  inclined  to  make  a  present  oi 
it  to  the  foreigner.  Its  value  is  transmitted,  for  the  purpose  of  obtaining  a  cor- 
responding value  in  return ;  but  the  nation  loses  the  value  of  the  coinage  in  this 
operation.  When  guineas  are  exported  from  England,  she  receives  in  exchange 
the  value  of  the  metal  only,  and  nothing  for  the  impression  it  bears.  (£») 

(a)  That  is  to  say,  to  receive  the  certificate  of  coinage,  for  use,  not  in  the  cha- 
racter of  money,  but  as  an  article  of  commerce.  The  assay  is  charged  for  at  the 
English  mint,  upon  bullion  re-delivered  without  coinage.  And,  before  the 
export  of  coin  was  made  free,  the  risk  was  probably  equal  to  the  value  of  the  cer- 
tificate conferred  by  coinage.  These  remarks  apply  to  the  coinage  of  gold  only, 
silver  being  now  subject  to  a  seignorage  of  4s.  in  66s.  But  silver  is  no  longer 
the  material  of  the  metallic  money,  except  for  minute  and  fractional  exchanges. 

T. 

(6)  This  is  hardly  true  to  the  full  extent.  The  Spanish  dollars  pass  current 
in  many  countries  at  a  considerable  advance  on  bullion  of  equal  weight  and  fine- 
ness, and  constitute  the  legal  currency  of  some  communities,  that  have  not  under- 
taken the  business  of  coinage  themselves ;  as  in  Hayti,  and  elsewhere.  The 
difference  is  the  local  value  of  the  coinage,  which  is  paid  for  sometimes  very 
liberally.  But  to  whom  is  it  paid?  to  the  Spanish  individual  or  to  the  Spanish 
government.  If  to  the  former,  it  is  an  undue  advantage  to  the  individual  at  the 
expense  of  the  community  ;  if  to  the  latter,  it  is  the  recompense  of  productive 
agencv.  Were  the  gold  coinage  of  England  subject  to  a  seignorage  like  the 
silver,  it  would  never  be  exported  habitually,  but  to  such  nations  as  were  con- 
tent to  pay  the  extra  value  of  the  coinage.  Indeed,  our  author  presently  says  in 
express  terms.,  that  the  value  of  the  coinage  is  not  always  lost  on  importation. 

T. 


CHAP.  XXL  ON  PRODUCTION.  231 

metal  coined  till  many  weeks,  and  often  months,  after  it  is  brought 
tor  coinage.*  The  consequence  is,  that  the  owner,  who  leaves  his 
bullion  to  be  coined,  loses  the  interest  of  its  value  during  the  whole 
time  it  remains  in  the  mint  This  operates  as  a  small  tax  on  coin- 
age, and  raises  the  value  of  the  coin  somewhat  above  that  of  bullion. 
For  it  is  manifest,  that  the  value  would  be  exactly  the  same,  if 
bullion  and  guineas  were  taken  without  distinction,  weight  for 
weight. 

So  much  for  the  effect  of  the  English  regulations  on  this  head. 

All  the  other  governments  of  Europe,  if  I  mistake  not,  derive  from 
the  coinage  a  revenue  more  than  equal  to  the  charges  of  the  process.f 
The  exclusive  privilege  of  issuing  money  which  they  have  most 
properly  engrossed,  together  with  the  severe  penalties  denounced 
against  private  coiners,  would  enable  them  to  raise  the  profit  of  the 
business  very  high  by  the  limitation  of  their  issues ;  for  the  value  of 
money,  like  that  of  every  thing  else,  is  always  in  the  direct  ratio  to 
the  demand,  and  in  the  inverse  ratio  to  the  supply. 

In  fact  when  silver  in  the  shape  of  coin  is  so  rare  and  dear,  that 
18  dollars  in  coin  will  purchase  the  weight  of  20  dollars  of  equal 
fineness  in  the  shape  of  bullion,  it  is  an  indication  that  the  public 
attaches  the  same  value  to  15  oz.  12  dwt.  of  coined,  as  to  17  oz.  6 
dwt.  16  grs.  of  uncoined  metal.  Wherefore,  the  government  can, 
by  its  coinage,  in  such  case,  give  to  9  dollars,  the  value  of  10  dollars, 
and  make  a  profit  of  10  per  cent.  But,  if  the  coin  become  more 
abundant,  and  more  of  it  be  necessary  in  exchange  for  bullion,  it 
may  perhaps  be  necessary  to  give  95  dollars  in  coin  for  the  weight 
of  100  dollars  in  bullion:  in  which  latter  case,  the  government  can 
make  a  profit  of  no  more  than  5  per  cent,  upon  the  purchase  and 
conversion  of  bullion  into  coin. 

If,  in  the  latter  case,  the  government,  with  a  view  to  increase  the 
ratio  of  its  profit,  instead  of  purchasing  bullion  itself,  were  simply 
to  charge  a  seignorage,  say  of  10  per  cent,  upon  the  bullion  brought 
to  the  mint  for  coinage,  none  at  all  would  be  brought  for  that  pur- 
pose by  individuals,  who  would  have  to  pay  1,0  per  cent,  for  an 
operation,  which  added  5  per  cent,  only  to  the  value  of  the  metal. 
Thus  the  mint  would  have  nothing  to  coin  either  on  public  or  private 
account;  and  the  government  would  find  a  high  ratio  of  profit  incom- 
patible with  an  extended  amount  of  coinage. 

*  Wealth  of  Nations,  book  i.  c.  5. 

t  One  of  my  German  translators,  the  learned  Professor  Morstadt,  of  Heidel 
berg,  has  observed  upon  this  passage,  that  since  1810,  the  Russian  government 
has  made  no  charge  for  the  coinage.  It  might  with  equal  reason  execute  gra- 
tuitously the  business  of  letter-carriage,  instead  of  charging  for  it  to  the  indi 
viduals. 

I  am  perhaps  incorrect  in  saying,  that  most  governments  make  a  profit  over 
and  above  the  expense  of  execution.  The  French  government  charges  a  seigno- 
rage, equal  at  most  to  defray  the  expense  of  the  mere  process.  But  the  interest 
and  wear  and  tear  of  the  capital  vested  in  buildings,  machinery,  &c.  and  the 
charge  of  administration,  &c.  are  so  much  dead  loss  to  the  government ;  and 
probably  many  other  governments  are  in  the  same  predicament. 


232  ON  PRODUCTION.  BOOK  I 

Whence  it  may  be  concluded,  that  the  duty  or  seignorage  upon 
coinage,  which  has  been  so  frequently  discussed,  is  an  absolute 
nullity  ;  for  that  governments  can  not  fix  their  own  ratio  of  profit 
upon  the  execution  of  the  coinage,  but  that  it  must  depend  upon  the 
state  of  the  bullion  market,  which  again  is  regulated  by  the  relative 
supplies  of  coined  and  uncoined  metal,  and  the  demand  for  them  at 
the  time  being. 

It  is  to  be  observed,  that,  to  the  public  at  large,  in  its  capacity  of 
consumer  of  coined  bullion,  it  is  a  matter  of  perfect  indifference, 
whether  the  coin  be  dear  or  cheap  ;  for,  so  long  as  its  value  is  not 
subject  to  sudden  fluctuations,  it  will  pass  current  for  as  much  as  it 
has  been  taken  for. 

When  the  coinage  of  money  is  not  executed  gratuitously,  and 
especially  when  it  is  paid  for  at  a  monopoly-price,  it  is  a  matter  of 
perfect  indifference  to  the  state,  whether  or  not  its  coin  be  melted 
down  or  exported,  for  it  can  neither  be  melted  down  or  exported, 
without  having  first  paid  the  coinage  in  full,  which  is  all  that  is  lost 
by  melting  or  exportation.*  On  the  contrary,  the  export  of  such 
coin  is  quite  as  advantageous  as  that  of  any  other  manufactured  com- 
modity whatever.  It  is  a  branch  of  the  bullion  trade  ;  and  unques- 
tionably, a  coin,  so  well  executed  as  to  be  difficult  to  counterfeit, 
accurate  in  the  weight  and  assay,  and  charged  with  a  moderate  duty 
on  the  coinage,  may  acquire  a  currency  in  different  parts  of  the 
world,  and  yield  the  government,  that  issues  it,  a  profit  of  no  con- 
temptible amount. 

Witness  the  gold  ducats  of  Holland,  which  are  in  request  through- 
out all  the  north  of  Europe,  at  a  higher  rate  than  their  intrinsic  value 
as  bullion;  and  the  dollars  of  Spain,  which  are  all  coined  at  Lima 
and  Mexico,  and  have  been  executed  with  so  much  regularity  and 
integrity,  as  to  pass  current  as  money  not  only  all  over  Spanish 
America,  but  likewise  in  the  United  States  and  in  several  parts  of 
Europe,  Africa,  and  Asia.f 

The  Spanish  dollar  is  a  remarkable  instance  of  the  value  attached 
to  the  metal  by  the  process  of  coinage.  When  the  Americans  of  the 
Union  determined  on  a  national  coinage  of  dollars,  they  contented 
themselves  with  simply  re-stamping  those  of  the  Spanish  mint,  with- 
out varying  their  weight  or  standard.  But  the  piece  thus  re- 
stamped  would  not  pass  current  with  the  Chinese,  and  other  Asiatics, 
at  the  same  rate;  100  dollars  of  the  United  States  would  not  pur- 
chase so  much  of  other  commodities  as  100  dollars  of  Spain.  The 
American  Executive,  nevertheless,  continued  to  deteriorate  the  coin 
by  giving  it  a  handsome  impression,  apparently  wishing  to  avail 


value  of  the  coinage,  or  fashion  of  the  metal,  is  not  always  lost  in  the 
oxport.  The  impression  is,  to  a  certain  degree,  a  recommendation  beyond  the 
limits  of  the  authority  which  executes  it,  and  raises  the  value  somewhat  higher 
than  that  of  bullion  in  bars. 

f  The  5  Jr.  pieces  of  France,  have,  by  their  invariable  uniformity  of  weight 
and  standard  since  their  first  issue,  acquired  a  similar  currency  in  many  parts  *  f 
the  world. 


CHAP.  XXI.  ON  PRODUCTION.  233 

itself  of  this  method  of  checking  the  export  of  specie  to  Asia.  For 
this  purpose  it  was  directed,  that  all  exports  of  specie  should  bo 
made  in  dollars  of  its  own  coinage,  hoping  in  this  way  to  make  the 
exporters  give  a  preference  to  the  domestic  products  of  its  own  ter- 
ritory. Thus,  after  wantonly  depreciating  the  Spanish  dollar,  with- 
out prejudice,  it  is  true,  to  the  specie  remaining  current  within  the 
territory  of  the  Union,  it  went  on  further  to  enjoin  its  use  in  the 
least  profitable  way,  viz.  in  the  commercial  intercourse  with  those 
nations  that  set  the  least  value  on  it.  The  natural  course  would 
have  been,  to  suffer  the  value  exported  to  go  out  of  the  country  in 
the  form  that  might  offer  the  prospect  of  the  largest  returns.  Self- 
interest  might  have  been  safely  relied  on  in  this  particular.  (1) 

But  what  are  we  to  think  of  the  wisdom  of  the  Spanish  govern- 
ment, which  was  enabled  by  the  confidence  in  its  good  faith  in  the 
execution  of  its  coinage,  to  export  dollars  with  a  profit,  and  sell  them 
abroad  at  an  advance  upon  their  intrinsic  value;  and  yet  thought  fit 
to  prohibit  so  advantageous  a  traffic,  which  would  have  furnished  a 
vent  to  a  product  of  the  national  soil,  worked  up  by  domestic  indus- 
try for  an  ample  recompense  1 

Though  a  government  be  the  exclusive  coiner  of  money,  and  is 
by  no  means  bound  to  coin  gratuitously,  it  can  not  with  justice 
deduct  the  expense  of  coinage  from  its  payments,  in  discharge  of  its 
own  contracts.  If  it  has  engaged  to  pay  a  million,  say  for  supplies 
advanced,  it  can  not  honestly  say  to  the  contractor :  "  We  bargained 
to  pay  a  million,  but,  we  pay  you  in  specie  just  coined ;  and  there- 
fore shall  deduct  20,000  dollars,  more  or  less,  for  the  charges  of 
coinage."  In  fact,  all  pecuniary  engagements,  contracted  by  govern- 
ment or  individuals,  virtually  imply  a  promise  to  pay  a  given  sum, 
not  in  bullion  but  in  coin.  The  act  of  exchange,  wherein  the  bar- 
gain originated,  is  effected  with  the  implied  condition,  on  behalf  of 
one  of  the  contracting  parties,  to  give  a  commodity  somewhat  more 
valuable  than  silver  bullion ;  namely,  silver  in  crown  pieces,  or  coin 
of  some  denomination  or  other.  The  virtual  contract  of  a  govern- 
ment is  to  pay  in  coined  money ;  and,  in  consequence  of  that  im- 
plied condition,  it  obtains  a  greater  quantity  of  goods,  than  it  will, 
if  the  bargain  be  to  pay  in  bullion.  In  this  instance,  it  offers  the 
charge  of  coinage  into  the  bargain  at  the  time  of  concluding  the 
contract,  and  thereby  obtains  better  terms,  than  if  it  is  in  the  habit 
of  paying  in  bullion. 

The  charges  of  coinage  should  be  deducted  from  the  metal  brought 

(1)  This  paragraph  contains  three  errors  in  relation  to  the  coinage  of  dollars 
by  the  United  States,  and  the  exportation  of  specie,  which  it  is  of  importance  to 
point  out:  1st.  Spanish  dollars  are  not,  and  never  have  been,  simply  restamped  at 
our  mint,  without  varying  their  weight  or  standard :  2d.  A  pound,  troy,  of  Spanish 
dollars,  contains  10  oz.  15  dwts.  of  fine  silver :  a  pound,  troy,  of  American  dot 
lars  contains  10  oz.  14  dwts.  5  grains  of  fine  silver :  3d.  No  law  has  ever  been 
enacted  by  Congress,  directing  the  exportation  of  specie  to  be  made  in  dollar.* 
of  our  own  coinage ;  nor  has  the  executive  the  power  to  regulate,  or  in  any 
manner  interfere  with  the  exportation  of  specie  from  the  United  States. 

AMERICAN  EDITOR. 

20*  2  E 


234  ON  PRODUCTION.  BOOK  I. 

to  the  mint  to  be  coined,  at  the  time  of  its  re-delivery  in  a  coined 
state. 

These  considerations  lead  us  to  the  necessary  conclusions, — that 
the  manufacture  of  bullion  into  coin  increases  the  value  of  the 
metal,  in  the  ratio  of  the  additional  convenience  resulting  to  the  com- 
munity, from  the  circumstance  of  coinage,  and  not  an  item  further, 
whatever  charges  or  duties  the  state  may  attempt  to  saddle  it  with  ;* 
(hat  a  government,  by  monopolising  the  business  of  coining,  may 
make  a  profit  to  the  whole  extent  of  this  accession  of  value ;  that  it 
can  not  possibly  advance  this  profit  any  further,  in  its  discharge  of 
engagements,  fairly  and  freely  entered  into ;  and  that  it  can  not  dc 
so  with  regard  to  prior  engagements,  without  committing  an  act  of 
partial  bankruptcy. 

Moreover,  it  is  evident  that,  in  all  dealings  between  individuals, 
the  public  authority  has  still  less  power,  by  means  of  the  impression 
of  its  die,  to  make  the  commodity,  acting  as  money,  pass  for  more 
than  its  intrinsic  value,  plus  the  value  added  by  the  fashion  it  receives. 
Vain  will  be  any  enactment,  that  the  stamp  impressed  shall  give  to 
an  ounce  of  silver  a  specific  or  determinate  value ;  it  will  never  buy 
more  goods  than  an  ounce  of  silver,  bearing  that  impression,  is  worth 
at  the  time  being. 


SECTION  V. 
Of  Alterations  of  the  Standard  Money. 

The  first  thing  to  be  observed  under  this  head  is,  that  the  public 
authority  has  generally  taken  upon  itself  to  fix  arbitrarily  the  com- 
modity, that  shall  serve  as  money.  This  assumption,  on  its  part,  has 
little  inconvenience  in  itself;  for  the  interests  of  the  nation  and  of 
the  ruling  power  happen  to  be  exactly  the  same.  Should  a  govern- 
ment attempt  to  force  an  ill-adapted  medium  into  circulation,  it  would 
sustain  a  loss  itself  on  every  bargain,  and  the  people  would,  by 
degrees,  adopt  some  other  medium.  Thus,  the  first  issue  of  coined 
money  among  the  Romans  was  by  their  King  Numa,  and  his  coin- 
age was  of  copper,  which  at  that  time  of  day  was  the  properest  metal 
for  the  purpose ;  for,  before  the  time  of  Numa,  the  Romans  knew  no 
other  money  but  copper  in  bars.  On  the  same  principle,  modern 
governments  have  made  choice  of  gold  and  silver,  which  would 
undoubtedly  have  been  selected  by  the  general  accord  of  individuals 
without  the  interference  of  their  rulers. 

But  the  sovereign  power,  being  firmly  persuaded  that  its  mandate 

*  In  Spanish  America,  a  higher  duty  is  charged,  amounting,  according  to  Hum- 
Loldt,  to  11 5  per  cent,  on  silver,  and  3  per  cent,  on  gold,  over  and  above  the 
actual  charges  of  coinage ;  for  the  government  allows  no  bullion  to  be  exported 
in  an  uncoined  state.  So  that,  in  fact,  this  is  not  a  seignorage,  but  a  duty  on 
eyoortation,  exacted  a',  the  time  of  converting  the  bullion  into  coin. 


CHAP.  XXf.  ON  PRODUCTION.  235 

was  necessary  and  competent  to  invest  any  commodity  whatever 
with  the  currency  of  money,  succeeded  in  impressing  its  subjects 
with  the  same  notion  during  the  darker  ages,  and  that  too  at  the  very 
time  that  individuals,  with  a  view  to  personal  interest,  were  acting 
upon  principles  diametrically  opposite ;  for,  whoever  was  dissatisfied 
with  the  authorised  money,  either  abstained  from  selling  altogether, 
or  disposed  of  his  goods  in  some  other  way. 

This  error  led  to  another  of  much  more  serious  mischief,  that  has 
overset  all  order  whatever. 

The  public  authority  persuaded  itself,  that  it  could  raise  or  depress 
the  value  of  money  at  pleasure ;  and  that  on  every  exchange  of  goods 
for  money,  the  value  of  the  goods  adjusted  itself  to  the  imaginary 
value,  which  it  pleased  authority  to  affix  to  it,  and  not  to  the  value 
naturally  attached  to  the  agent  of  exchange,  money,  by  the  conflict- 
ing influence  of  demand  and  supply. 

Thus,  when  Philip  I.  of  France,  adulterated  the  lime  of  Charle- 
magne, containing  12  oz.  of  fine  silver,*  and  mixed  with  it  a  third 
part  alloy,  but  still  continued  to  call  it  a  livre,  though  containing  but 
8  oz.  of  fine  silver,  he  was  nevertheless  fully  persuaded,  that  his 
adulterated  livre  was  worth  quite  as  much  as  the  livre  of  his  prede- 
cessors. Yet  it  was  really  worth  1-3  less  than  the  livre  of  Charle- 
magne. A  livre  in  coin  would  purchase  but  2-3  of  what  it  had  done 
before.  However,  the  creditors  of  the  monarch,  and  of  individuals, 
got  paid  but  2-3  of  their  just  claims ;  land-owners  received  from  their 
tenants  but  2-3  of  their  former  revenue,  till  the  renewal  of  leases 
placed  matters  on  a  more  equitable  footing.  Abundance  of  injustice 
was  committed  and  authorised :  but  after  all  it  was  impossible  to 
make  8  oz.  of  fine  silver  equal  to  12.f 

In  the  year  1113,  the  livre,  as'it  was  still  called,  contained  no  more 
than  6  oz.  of  fine  silver.  At  the  commencement  of  the  reign  of  Louis 
VII.  it  had  been  reduced  to  4  oz.  St.  Louis  gave  the  name  of  livre 
to  a  quantity  of  silver  weighing  but  2  oz.  or  6  gros.  6  grains.J  At 
the  era  of  the  French  revolution,  the  money  bearing  that  name 
weighed  only  the  1-6  of  an  oz. ;  so  that  it  had  been  reduced  to  1.72 
of  its  original  standard  of  weight  or  quality  in  the  days  of  Charle^ 
magne. 

I  take  no  notice,  at  present,  of  the  great  fall  experienced  in  the 
relative  value  of  fine  silver  to  commodities  at  large,  which  has  been 

*  The  measure  of  weight  called  a  livre  contained  12  oz.  in  the  time  of  Char- 
lemagne. 

f  According  to  the  principles  established  supra,  sect.  3  of  this  chapter,  there 
is  reason  to  believe,  that  the  value  of  the  adulterated  lime  of  8  oz.  of  fine  silver 
might  have  been  kept  up  to  that  of  the  old  livre  of  12  oz.,  if  the  volume  of  the 
coin  had  not  been  augmented.  But  the  rise  of  money  prices,  consequent  upon 
the  adulteration  of  the  coin,  is  a  ground  of  presumption,  that  the  government, 
with  a  view  to  profit  by  this  momentary  operation,  ordered  a  recoinage,  and 
made  12  pieces  out  of  8,  by  the  addition  of  alloy,  so  as  to  increase  the  total 
quantity  proportionately  to  the  reduction  of  the  standard  of  quality. 

t  We  find  in  the  Prolegomenes  of  Le  Blanc,  25,  that  the  silver  sol  of  St.  LOUIJI 
weighed  1  pros.  1\  grains,  which,  multiplied  by  20,  makes  2  oz.  6  gros  0 
grains,  the  livre. 


236  ON  PRODUCTION.  BOOK  1. 

V 

reduced  so  low  as  1-4  of  its  former  amount ;  but  this  is  foreign  to  the 
subject  of  the  present  section,  and  I  shall  take  occasion  to  speak  of 
it  hereafter. 

Thus  the  term,  livre  tournois,  has  at  different  times  been  applied 
to  very  different  quantities  of  fine  silver.  The  alteration  has  been 
effected,  sometimes  by  reducing  the  size  and  weight  of  the  coin 
bearing  that  denomination,  sometimes  by  deteriorating  the  standard 
of  quality,  that  is  to  say,  mixing  up  a  larger  portion  of  alloy,  and  a 
smaller  one  of  pure  metal ;  and,  sometimes,  by  raising  the  denomina- 
tion of  a  specific  coin;  making,  for  instance,  what  was  before  a  2fr. 
piece  |  ass  under  the  name  of  one  of  3  fr.  As  no  account  is  ever 
taken  of  any  thing  but  the  pure  silver,  which  is  the  only  valuable 
substance  in  silver  coin,  all  these  expedients  have  had  a  similar  effect; 
for  this  reason ;  that  they  all,  in  fact,  reduced  the  quantity  of  silver 
contained  in  what  was  called  a  livre  tournois.  Arid  this  is  what  all 
French  writers,  in  compliment  to  the  royal  ordinances,  have  digni- 
fied by  the  term,  raising  the  standard ;  on  the  ground,  that  the  nomi- 
nal value  of  the  coin  is  raised  by  these  operations ;  which  might,  with 
much  more  propriety,  be  said  to  lower  the  standard,  since  the  metal, 
which  alone  constitutes  the  money,  is  thereby  reduced  in  quantity. 

Though  the  quantity  of  metal  in  the  livre  has  been  continually 
decreasing  from  the  days  of  Charlemagne  till  the  present  period, 
many  of  our  monarchs  have,  at  different  times,  adopted  a  contrary 
course,  and  advanced  the  weight  and  standard  of  quality,  particu- 
larly since  the  reign  of  St.  Louis.  The  motives  for  deterioration 
are  evident  enough :  it  is  extremely  convenient  to  pay  one's  debts 
with  less  money  than  one  borrowed.  But  kings  are  not  only 
debtors ;  they  are  frequently  creditors  too.  In  the  matter  of  taxa- 
tion, they  stand  precisely  in  the  same  relative  position  to  the  subject, 
as  landlords  to  their  tenants.  Now,  if  every  body  be  enabled  by 
law  to  pay  their  debts  and  discharge  their  contracts  with  a  less 
amount  of  silver  than  bargained  for,  the  subject,  of  course,  can  pay 
his  taxes,  and  the  tenant  his  rent,  with  a  smaller  quantity  of  that 
metal.  And,  although  the  king  received  less  silver,  yet  he  continued 
to  spend  as  much  as  before;  for  the  nominal  price  of  commodities 
rose,  in  proportion  to  the  diminution  of  metal  in  the  coin.  When 
what  was  before  3fr.  was  declared  by  law  to  be  4  fr.  the  govern- 
ment was  obliged  to  pay  4  fr.  where  it  before  paid  but  3  fr. ;  so 
that  it  was  necessary,  either  to  increase  the  old,  or  to  impose  new 
taxes;  in  other  words,  the  government,  to  obtain  the  same  quantity 
of  fine  silver,  was  obliged  to  demand  a  greater  number  of  livres 
from  the  subject.  This  course,  however,  was  always  odious,  even 
when  it  really  made  no  difference  in  the  real  pressure  of  taxation, 
and  was  often  quite  impracticable.  Recourse  was,  therefore,  had  to 
the  restoration  of  the  coin  to  the  higher  standard.  The  livre  being 
made  to  contain  a  greater  weight  of  silver,  the  nation  really  paid. 
more  silver  in  paying  the  same  number  of  livres.*  Thus  we  find, 

*  The  same  expedient  was  resorted  to  by  that  monster  of  prodigality,  the  Ro- 
tuan  emperor  Heliogabalus.  The  taxes  of  the  empire  were  payable  in  specific 


CHAP.  XXI.  ON  PRODUCTION.  237 

that  the  ameliorations  of  the  coin  commence  nearly  about  the  same 
period  as  the  establishment  of  permanent  taxation.  Before  that 
innovation,  the  monarch  had  no  personal  motive  for  increasing  the 
intrinsic  value  of  the  coin  he  issued. 

It  would  be  a  great  mistake  to  suppose  that  the  frequent  varia- 
tions of  standard  alluded  to,  were  effected  in  the  same  clear  and 
intelligible  manner  which  I  have  adopted  to  explain  them.  Some- 
times the  alteration,  instead  of  being  openly  avowed,  was  kept  secret 
as  long  as  possible;*  and  this  attempt  at  concealment  gave  occasion 
to  the  barbarous  technical  jargon  used  in  this  branch  of  manufacture. 
At  other  times,  one  denomination  of  coin  was  altered,  while  the  rest 
were  left  untouched;  so  that,  at  a  given  period,  a  livre,  paid  in  one  de- 
nomination, contained  more  silver  than  if  paid  in  another.  Finally, 
to  throw  the  matter  in  still  greater  obscurity,  the  subject  was  com- 
monly forced  to  reckon  up  his  accounts,  sometimes  in  Kvres  and 
sous,  sometimes  in  crowns,  and  to  pay  in  coin  representing  neither 
livre,  sol,  nor  crown,  but  either  fractions  or  multiples  of  these  seve- 
ral denominations.  Princes,  that  resort  to  such  pettifogging  ex- 
pedients, can  be  viewed  in  no  other  light,  than  as  counterfeiters 
armed  with  public  authority. 

The  injurious  effect  of  such  measures  upon  credit,  commercial  in- 
tegrity, industry,  and  all  the  sources  of  prosperity,  may  be  easily 
conceived  ;  indeed,  it  was  so  serious,  that,  at  several  perfods  of  out 
history,  the  monetary  operations  of  the  state  suspended  all  com- 
merce whatever.  Philip  le  Bel  drove  all  foreigners  out  of  the  fairs 
of  France,  by  compelling  them  to  receive  his  discredited  coin  in 
payment,  and"  prohibiting  the  making  of  bargains  in  a  coin  of  better 
credit,  f  Philip  de  Valois  did  the  same  thing  with  respect  to  the 
gold  coin,  and  with  precisely  the  same  result.  A  cotemporary 
chronicler  J  informs  us,  that  almost  all  foreign  merchants  discon- 
tinued their  dealings  with  France ;  that  the  French  traders  them- 
selves, ruined  by  the  frequent  alterations  of  the  coin,  and  the  con- 
sequent uncertainty  of  values,  withdrew  to  other  countries;  and  that 
the  rest  of  the  king's  subjects,  both  noble  and  bourgeois,  were 
equally  impoverished  with  the  merchants;  for  which  reason,  the 
annalist  adds  simply  enough,  the  king  was  not  at  all  beloved. 

The  examples  I  have  cited  are  taken  from  the  monetary  system 

gold  coin,  called  aurei,  and  not  in  gold  by  the  tale  :  and  the  emperor,  to  enlarge 
his  receipts,  made  a  new  issue  ofaurei,  weighing  as  much  as  24  oz.  each.  The 
virtuous  Alexander  Severus,  actuated  by  an  opposite  motive,  made  a  considerable 
i  eduction  of  the  weight. 

*  Philip  de  Valois,  in  his  official  instructions  to  the  officers  of  the  mint, 
A.  D.  1350,  enjoins  the  utmost  secrecy  on  the  subject  of  the  purposed  adultera- 
tion, even  with  the  sanction  of  an  oath,  for  the  express  purpose  of  taking  in  the 
commercial  classes;  directing  them  "to  put  a  good  face  upon  the  matter  of  the 
course  of  exchange  of  the  mark  of  gold,  so  that  the  intended  adulteration  might 
not  be  discovered."  Many  similar  Instances  are  to  be  met  with  in  the  reign  (/ 
King  John.  Le  Blanc,  Traite  Hist,  des  Monnaies,  p.  251. 

i  Le  Blanc,  Traite  Hist,  des  Monnaies,  p.  27. 

\  Matthieu  Villani. 


238  ON  PRODUCTION.  BOOK  I. 

of  France;  but  similar  expedients  have  been  practised  in  almost 
every  nation,  ancient  or  modern.  Popular  forms  of  government 
have  been  equally  culpable  with  those  of  a  despotic  character.  The 
Romans,  during  the  most  glorious  periods  of  the  republic,  effected  a 
national  bankruptcy  more  than  once,  by  deteriorating  the  intrinsic 
value  of  their  coin.  In  the  course  of  the  first  Punic  war,  the  as, 
which  was  originally  12  oz.  of  copper,  was  reduced  to  2  oz. ;  and,  in 
the  second  Punic  war,  was  again  lowered  to  1  oz.* 

In  the  year  1722,  the  State  of  Pennsylvania,  which  acted,  in  this 
particular,  as  an  independent  government,  even  before  the  American 
war,  passed  a  law,  enacting,  that  I/,  sterling  should  pass  for  11.  5s.  ;f 
and  the  United  States,  and  France  also,  after  declaring  themselves 
republics,  have  both  gone  still  further. 

"  It  would  require  a  separate  treatise,"  says  Stewart,  "  to  investi- 
gate all  the  artifices  which  have  been  contrived  to  make  mankind 
lose  sight  of  the  principles  of  money,  in  order  to  palliate  and  make 
this  power  in  the  sovereign  to  change  the  value  of  the  coin  appear 
reasonable.''^  He  might  have  added,  that  such  a  volume  would  be 
of  little  practical  service,  and  by  no  means  prevent  the  speedy  adop- 
tion of  some  new  device  of  the  same  kind.  The  only  effectual  pre- 
ventive would  be,  the  exposure  of  the  corrupt  system,  that  engen- 
ders such  abuses;  were  that  system  rendered  simple  and  intelligible, 
every  abuse  would  be  detected  and  extinguished  in  the  outset. 

And  let  no  government  imagine,  that,  to  strip  them  of  the  power 
of  defrauding  their  subjects,  is  to  deprive  them  of  a  valuable  privi- 
lege. A  system  of  swindling  can  never  be  long-lived,  and  must 
infallibly  in  the  end  produce  much  more  loss  than  profit.  The  feel- 
ing of  personal  interest  is  that  which  soonest  awakens  the  inte- 
lectual  faculties  of  mankind,  and  sharpens  the  dullest  apprehensions. 
Wherefore,  in  matters  affecting  personal  interest,  a  government  has 
the  least  chance  of  outwitting  its  subjects.  Individuals  are  not 
easily  duped  by  measures  tending  to  procure  supplies  to  the  state  in 
an  under-hand  manner:  and  although  they  cannot  guard  against 
direct  outrage,  or  breach  of  public  faith,  yet  it  can  never  long  escape 
their  penetration,  however  artfully  disguised  and  concealed.  The 
government  will  acquire  a  character  for  cunning  as  well  as  faithless- 
ness, and  will  lose  entirely  the  powerful  engine  of  credit,  which  will 
operate  with  infinitely  more  efficacy,  than  the  mere  trifle  that  fraud 
can  procure.  Yet,  even  that  trifle  will  often  be  wholly  engrossed 
by  the  agents  of  government,  who  are  sure  to  turn  every  act  of  in- 
justice towards  the  subject,  to  their  own  private  advantage.  Thus, 
while  the  government  loses  its  credit,  its  agents  get  all  the  profit ; 
and  the  public  authority  is  disgraced,  for  no  other  purpose,  than  to 
enrich  its  menials. 

The  real  interest  of  a  government  is,  to  look  not  to  fictitious,  dis- 
graceful, and  destructive  resources,  but  to  such  as  are  really  prolific 

*  Montesquieu,  Espiit  des  Lois,  liv.  xxii.  c.  11. 

f  Smith's  Wealth  of  Nations,  book  ii.  c.  2. 

t  Stewart's  Inquiry  into  the  Princ.  Pol.  Econ.  8vo.  1805,  vol.  ii.  p.  306. 


CHAP.  XXI.  ON  PRODUCTION.  230 

and  inexhaustible ;  and  one  can  render  it  no  better  service,  than  to 
expose  and  render  abortive  those  of  the  former  kind,  and  point  oul 
to  it  those  of  the  latter. 

The  immediate  consequence  of  a  deterioration  of  the  coin  is,  a 
proportionate  reduction  of  all  debts  and  obligations  payable  in 
money ;  of  all  perpetual  or  redeemable  rent-charges,  whether  upon 
the  state  or  upon  individuals;  of  all  salaries,  pensions,  and  rack- 
rents;  in  short,  of  all  values  previously  expressed  in  money;  by 
which  reduction,  the  debtor  gains  what  the  creditor  loses.  It  is  a 
legal  authorization  of  a  partial  bankruptcy,  or  compromise,  by  every 
money-debtor  with  his  creditor,  for  a  sum  less  than  his  fair  claim,  in 
the  ratio  of  the  diminution  of  precious  metal  in  the  same  denomina- 
tion of  coin. 

Thus,  whatever  government  has  recourse  to  this  expedient,  is  not 
content  with  giving  itself  an  illegitimate  advantage,  but  urges  all 
other  debtors  to  do  so  likewise. 

The  kings  of  France,  however,  have  not  always  allowed  their  sub- 
jects to  reap  the  same  advantage  in  their  private  concerns,  which  the 
monarch  proposed  to  himself  by  the  operation  of  increasing  or  dimin- 
ishing the  quantity  of  metal  contained  in  a  particular  denomination 
of  coin.  Their  personal  motive  was,  on  all  such  occasions,  to  pay 
less,  or  receive  more  silver  or  gold  themselves,  than  in  honesty  they 
ought ;  but  they  sometimes  compelled  individuals,  notwithstanding 
the  alteration,  to  pay  and  receive  in  the  old  coin,  or,  if  in  the  new,  at 
the  current  rate  of  exchange  between  the  two.*  This  was  a  close 
copy  of  a  Roman  precedent  When  that  republic,  in  the  second 
Punic  war,  reduced  the  as  of  copper  from  two  oz.  to  one,  the  repub- 
lic paid  its  creditors  1  as  instead  of  two,  that  is  to  say,  50  per  cent, 
on  their  claims.  But  private  accounts  were  kept  in  denarii;  and 
the  denarius,  which  till  then  was  worth  10  asses,  was,  by  law,  made 
to  pass  for  16  asses;  so  that  individuals  paid  16  asses  or  oz.  of  cop- 
per only  for  every  denarius,  instead  of  paying  20  as  they  should 
have  done  to  fulfil  their  engagements:  that  is  to  say,  10  asses  of  2 
oz.  or  20  of  1  oz.  each,  for  every  denarius.  Thus,  the  republic  paid 
a  dividend  of  50  per  cent,  only,  but  compelled  private  persons  to  pay 
one  of  80  per  cent. 

A  bankruptcy,  effected  by  deterioration  of  the  coin,  has  been 
sometimes  considered  in  the  light  of  a  plain  and  simple  bankruptcy, 
or  mere  reduction  of  the  public  debt.  It  has  been  thougnt  less  inju 
rious  to  the  public  creditor  to  pay  him  in  adulterated  coin,  that  he 
again  may  pay  over  at  the  same  rate  as  he  receives  it,  than  to  cui- 
tail  his  claim  by  £,  £,  or  in  any  other  proportion.  Let  us  see  how 
the  two  methods  differ. 

In  either  case,  the  creditor  is  equally  a  loser  in  all  his  purchases 
posterior  to  the  bankruptcy.  Whether  his  income  be  abridged  by 
one-half,  or  whether  he  find  himself  obliged  to  pay  for  every  ihing 
twice  as  dear  as  before,  is  to  him  precisely  the  same  thing. ^ 

*  Vide  the  several  ordinances  of  Philip  le  Bel  in  1303;  of  Philio  de  Vaiois  ui 
1329  and  1343;  of  John  in  1354;  and  of  Charles  VI.  in  1421. 


240  ON  PRODUCTION.  BOOK  L 

As  to  all  his  own  existing  debts,  he  may  undoubtedly  get  rid  of 
them  on  the  same  terms  as  the  public  has  discharged  his  own  claim ; 
hul  what  ground  is  there  for  supposing,  that  the  public  creditors  are 
always  in  arrear  in  their  private  accounts  with  the  rest  of  the  com- 
munity? They  stand  in  the  same  relation  to  society  as  all  other 
classes ;  and  there  is  every  reason  to  believe  that  the  public  creditors 
have  as  much  owing  to  them  by  one  set  of  individuals  as  they  owe 
themselves  to  another;  in  short,  that  the  accounts  will  square. 
Thus,  the  injustice  they  do  to  their  private  claimants  is  balanced  by 
the  injury  they  receive;  and  a  bankruptcy,  in  the  shape  of  a  dete- 
rioration of  the  coin,  is  to  them  full  as  bad,  as  in  any  other  shape. 

But  it  is  attended  with  other  serious  evils,  destructive  of  national 
welfare  and  prosperity. 

It  occasions  a  violent  dislocation  of  the  money-prices  of  commo- 
dities, operating  in  a  thousand  different  ways,  according  to  the  parti- 
cular circumstances  of  each  respectively,  and  thereby  disconcerting 
the  best  planned  and  most  useful  speculations,  and  destroying  all 
confidence  between  lender  and  borrower.  Nobody  will  willingly 
lend  when  he  runs  the  risk  of  receiving  a  less  sum  than  he  has 
advanced ;  nor  will  any  one  be  in  a  hurry  to  borrow,  if  he  is  in  dan- 
ger of  paying  more  than  he  gets.  Capital  is,  consequently,  diverted 
from  productive  investment,  and  the  blow  given  to  production  by 
deterioration  of  the  coin,  is  commonly  followed  up  by  the  still  more 
fatal  ones  of  taxation  upon  commodities,  and  the  establishment  of  a 
maximum  of  price. 

Nor  is  the  effect  less  serious  in  respect  to  national  morality.  Peo- 
ple's ideas  of  value  are  kept  in  a  state  of  confusion  for  a  length  of 
time,  during  which  knavery  has  an  advantage  over  honest  simplicity, 
in  the  conduct  of  pecuniary  matters.  Moreover,  robbery  and  spo- 
liation are  sanctioned  by  public  practice  and  example:  personal  inter- 
est is  set  in  opposition  to  integrity ;  and  the  voice  of  the  law  to  the 
impulse  of  conscience. 


SECTION  VI. 
Of  the  reason  why  Money  is  neither  a  Sign  nor  a  Measure. 

Money  would  be  a  mere  sign  or  representative,  had  it  no  intrin- 
sic value  of  its  own;  but,  on  the  contrary,  whenever  it  is  employed 
in  sale  or  purchase,  its  intrinsic  value  alone  is  considered.  When 
an  article  is  sold  for  a  dollar  piece,  it  is  not  the  impression  or  the 
name  that  is  given  or  taken  in  exchange,  but  the  quantity  of  silver 
that  is  known  to  be  contained  in  it.  As  a  proof  of  the  truth  of  this 
position,  it  the  government  were  to  issue  crown  pieces  made  of  tin 
or  pewter,  they  would  not  be  worth  so  much  as  those  of  silver. 
Though  declared  by  law  to  be  of  equal  value,  a  great  many  more  of 
ineir.  would  be  required  in  purchase  of  the  same -commodities; 
which  would  not  happen  if  they  were  nothing  but  a  mere  sign. 


CHAP.  XXL  ON  PRODUCTION.  241 

Violence,  ingenuity,  or  extraordinary  political  circumstances  have 
sometimes  kept  up  the  current  value  of  a  money,  after  a  reduction 
of  its  intrinsic  value ;  but  not  for  any  length  of  time.  Personal  inter- 
est  very  soon  finds  out  whether  more  value  is  paid  than  is  received, 
and  contrives  some  expedient  to  avoid  the  loss  of  an  unequal  and 
unfair  exchange.  Even  when  the  absolute  necessity  of  finding  some 
medium  of  circulation  of  value  obliges  a  government  to  invest  with 
value  an  agent  destitute  either  of  intrinsic  value  or  substantial  guar- 
antee, the  value  attached  to  the  sign  by  this  demand  for  a  medium, 
is  actual  value,  originating  in  utility,  and  makes  it  a  substantive 
object  of  traffic.  A  Bank  of  England  note,  during  the  suspension  of 
cash  payments,  was  of  no  value  whatever  as  a  representative ;  for  it 
then  really  represented  nothing,  and  was  a  mere  promise  without 
security,  given  by  the  bank,  which  had  advanced  it  to  the  govern 
ment  without  any  security ;  yet  this  note,  by  its  mere  utility,  was 
possessed  of  positive  value  in  England,  as  a  piece  of  gold  or  silver. 

But  a  bank-note,  payable  on  demand,  is  the  representative,  the 
sign,(l)  of  the  silver  or  specie,  which  may  be  had  whenever  it  is 
wanted,  on  presenting  the  note.  The  money  or  specie,  which  the 
bank  gives  for  it  is  not  the  representative,  but  the  thing  represented. 

When  a  man  sells  any  commodity,  he  exchanges  it,  not  for  a  sign 
or  representative,  but  for  another  commodity  called  money,  which 
he  supposes  to  possess  a  value  equal  to  the  value  sold.  When  he 
buys,  he  does  so,  not  with  a  sign  or  representative,  but  with  a  com- 
modity of  real,  substantial  value,  equivalent  to  the  value  received. 

A  radical  error,  in  this  particular,  has  given  rise  to  another  of  very 
general  prevalence.  Money  having  been  pronounced  to  be  the  sign 
of  all  values  whatever,  it  was  boldly  inferred,  that,  in  every  country, 
the  total  value  of  the  money,  bank  and  other  notes,  and  credit  paper, 
is  equal  to  the  total  value  of  all  other  commodities.  A  position  that 
derives  some  show  of  plausibility,  from  the  circumstance,  that  the 
relative  value  of  money  declines  when  its  quantity  is  increased,  and 
advances  when  that  quantity  is  diminished. 

(1)  The  term,  "  representative,"  or  "  sign,"  of  silver  or  specie,  as  applied  to 
bank-notes,  has  no  precise  or  definite  meaning.  A  bank-note,  with  no  sort  of 
accuracy  can  be  said  to  be  "the  representative  of  money;"  and  as  such  loose 
metaphorical  expressions  have  given  occasion  to  most  of  the  vague  and  mystical 
notions  respecting:  paper-money  which  have  been  too  long  current,  and  only 
serve  to  involve  the  subject  in  obscurity  and  confusion,  they  cannot  too  soon  be 
discarded. 

We  have  already  seen,  that  coins  are  neither  more  nor  less  than  commodities, 
which  are  bought  and  sold  for  their  value,  like  other  commodities.  Bank-notes 
are  not,  any  more  than  bills  of  exchange,  or  other  transferable  engagements  for 
the  payment  of  money,  the  representatives  or  symbols  of  these  commodities, 
but  are  actual  obligations  for  the  payment,  on  demand,  or  at  a  stated  time,  of  the 
quantity  of  the  coins  expressed  on  the  face  of  them,  and  are  themselves  receive! 
.n  payment  as  readily  as  specie  itself,  only  when  it  is  perfectly  understood, 
that  the  specie  can  be  obtained  for  them,  or  when  it  is  generally  known,  th:i. 
they  '.\ill  be  as  readily  received  in  the  market  as  the  coins  which  they  specify 

AMERICAN  EDITOR 
21  2F 


242  ON  PRODUCTION.  BOOK  I 

It  is  obvious,  however,  that  the  same  fluctuation  affects  all  other 
commodities  whatever.  If  the  vintage  be  twice  as  productive  one 
year  as  it  is  another  year,  the  price  of  wine  falls  to  half  what  it  was 
the  year  preceding.  In  like  manner,  one  may  readily  concede,  that, 
should  the  aggregate  of  circulating  specie  be  doubled,  the  prices  of 
all  goods  would  be  doubled  also ;  in  other  words,  twice  the  quantity 
of  specie  would  go  to  the  purchase  of  the  same  articles.  But  this 
consequence  by  no  means  proves,  that  the  total  value  of  the  circu- 
lating mediunTis  always  equal  to  the  sum  total  of  all  the  other  items 
of  wealth,  any  more,  than  that  the  sum  total  of  the  produce  of  the 
vintage  is  equal  to  the  totality  of  other  values.  The  casual  fluctua- 
tion in  the  value  of  silver  and  of  wine,  in  the  cases  supposed,  is  the 
effect  of  a  difference  in  quantity  of  these  respective  commodities  at 
two  different  times,  and  has  nothing  to  do  with  the  quantity  of  other 
commodities. 

It  has  been  already  remarked,  that  the  total  value  of  the  money  of 
any  country,  even  with  the  addition  to  the  value  of  all  the  precious 
metals  contained  in  the  nation  under  any  other  shape,  is  but  an 
atom,  compared  with  the  gross  amount  of  other  values.  Wherefore, 
the  thing  represented  would  exceed  in  value  the  representative ;  and 
the  latter  could  not  command  the  presence  or  possession  of  the 
former.* 

Nor  is  the  position  of  Montesquieu,  that  money-price  depends  upon 
the  relative  quantity  of  the  total  commodities  to  that  of  the  total 
money  of  the  nationf  at  all  better  founded.  What  do  sellers  and 
buyers  know  of  the  existence  of  any  other  commodities,  but  thost 
that  are  the  objects  of  their  dealing?  And  what  difference  could 
such  knowledge  make  in  the  demand  and  supply  in  respect  to  those 
particular  commodities'?  These  opinions  have  originated  in  the 
ignorance  at  once  of  fact  and  of  principle. 

Money  or  specie  has  with  more  plausibility,  but  in  reality  with 
no  better  ground  of  truth,  been  pronounced  to  be  a  measure  of 
value.  Value  may  be  estimated  in  the  way  of  price ;  but  it  can  not 
be  measured,  that  is  to  say,  compared  with  a  known  and  invariable 
measure  of  intensity,  for  no  such  measure  has  yet  been  discovered. 

Authority,  however  absolute,  can  never  succeed  in  fixing  the 
general  ratio  of  value.  It  may  enact,  that  John,  the  owner  of  a  sack 
of  wheat,  shall  give  it  to  Richard  for  4  dollars ;  and  so  it  may  that 
John  shall  give  his  sack  of  wheat  for  nothing.  This  enactment  will 
probably  rob  John  to  benefit  Richard ;  but  it  can  no  more  make  4 

*  If  credit-paper  be  thrown  into  the  scale,  it  will  not  help  us  over  this  diffi- 
culty. The  agent  of  circulation,  whether  in  form  of  specie  or  of  paper,  can 
never  exceed  in  amount  the  total  utility  vested  in  it.  The  expansion  of  the  vo- 
Aime  of  a  national  money,  whether  of  metal  or  of  paper,  is  sure  to  be  followed 
by  a  proportionate  dilution  of  its  value,  which  disables  the  whole  from  being 
equal  to  the  purchase  of  a  greater  portion  of  commodities  at  large :  and  the 
value,  devoted  to  the  business  of  circulation,  is  always  a  trifle,  compared  with 
the  value  it  is  employed  to  circulate.  Vide  infra,  under  the  head  of  Bank-notes. 

i-  Esprit  Jes  Lois,  liv.  xxii.  c.  7. 


CHAP.  XXI.  ON  PRODUCTION.  243 

dollars  the  exact  measure  of  the  value  of  a  sack  of  wheat,  than  it  can 
make  a  sack  of  wheat  worth  nothing,  by  ordering  it  to  be  given  for 
nothing. 

A  yard  or  a  foot  is  a  real  measure  of  length ;  it  always  presents 
to  the  mind  the  idea  of  the  self-same  degree  of  length.  No  matter 
in  what  part  of  the  world  a  man  may  be,  he  is  quite  sure,  that  a 
man  of  6  feet  high  in  one  place  is  as  tall  as  a  man  6  feet  high  in 
another.  When  I  am  told  that  the  great  pyramid  of  Ghaize  is  656 
feet  square  at  the  base,  I  can  measure  a  space  of  656  feet  square  at 
Paris,  or  elsewhere,  and  form  an  exact  notion  of  the  space  the  pyra- 
mid will  cover ;  but  when  I  am  told  that  a  camel  is  at  Cairo  worth 
50  sequins,  that  is  to  say,  about  90  ounces  of  silver,  or  100  dollars 
in  coin,  I  can  form  no  precise  notion  of  the  value  of  the  camel ; 
because,  although  I  may  have  every  reason  to  believe  that  100  dol- 
lars are  worth  less  at  Paris  than  at  Cairo,  I  can  not  tell  what  may  be 
the  difference  of  value. 

The  utmost,  therefore,  that  can  be  done  is,  merely  to  estimate  or 
reckon  the  relative  value  of  commodities;  in  other  words,  to  declare, 
that  at  a  given  time  and  place,  one  commodity  is  worth  more  or  less 
than  another ;  their  positive  value  it  is  impossible  to  determine.  A 
house  may  be  said  to  be  worth  4000  dollars;  but  what  idea  does  that 
sum  present  to  the  mind?  The  idea  of  whatever  I  can  purchase 
with  it ;  which  is,  in  fact,  as  much  as  to  say,  the  idea  of  value  equi- 
valent to  the  house,  and  not  of  value  of  any  fixed  degree  of  inten- 
sity, or  independent  of  comparison  between  one  commodity  and 
another. 

When  two  objects  of  unequal  value  are  both  compared  to  differ- 
ent portions  of  one  specific  product,  still  it  is  a  mere  estimate  of 
relative  value.  -One  house  is  said  to  be  worth  4000  dollars,  another 
2000  dollars ;  which  is  simply  saying,  the  former  is  worth  two  of 
the  latter.  It  is  true,  that,  when  both  are  compared  to  a  product 
capable  of  separation  into  equal  portions,  as  money  is,  a  more  accu- 
rate idea  can  be  formed  of  the  relative  value  of  one  to  the  other;  for 
the  mind  has  no  difficulty  in  conceiving  the  relation  of  2  integers  to 
1,  or  4000  to  2000.  But  any  attempt  to  form  an  abstract  notion  of 
the  value  of  one  of  these  integers  must  be  abortive. 

If  this  be  all  that  is  meant  by  the  term,  measure  of  value,  I 
admit  that  money  is  such  a  measure ;  but  so,  it  should  be  observed, 
is  every  other  divisible  commodity,  though  not  employed  in  the 
character  of  money.  The  ratio  of  the  one  house  to  the  other  will 
be  equally  intelligible,  if  one  be  said  to  be  worth  1000,  and  the  other 
only  ^00,  quarters  of  wheat. 

Nor  will  this  measure  of  relative  value,  if  we  may  so  call  it, 
convey  an  accurate  idea  of  the  ratio  of  two  commodities  one  to  the 
other,  at  any  considerable  distance  of  time  or  place.  The  1000 
quarters  of  wheat,  or  4000  dollars,  will  not  be  of  any  use  in  the 
comparison  of  a  house  in  former,  with  a  house  in  the  present  times , 
for  the  value  of  silver  coin  and  of  wheat  have  both  varied  in  the 
interim.  A  house  at  Paris,  worth  10,000  crowns  in  he  days  of 


244  ON  PRODUCTION.  BOOK  L 

Henry  IV.,  would  now  be  worth  a  great  deal  more,  than  another  of 
that  value  now-a-days.  So,  likewise,  one  in  Lower  Britany,  worth 
4000  dollars,  is  of  much  more  value  than  one  of  that  price  at  Paris; 
for  the  same  reason  that  an  income  of  2000  dollars  is  a  much  larger 
one  in  Britany  than  at  Paris. 

Wherefore' it  is  impossible  to  succeed  in  comparing  the  wealth  of 
different  eras  or  different  nations.  This,  in  political  economy,  like 
squaring  the  circle  in  mathematics,  is  impracticable,  for  want  of  a 
common  mean  or  measure  to  go  by. 

Silver,  and  coin  too,  whatever  be  its  material,  is  a  commodity, 
whose  value  is  arbitrary  and  variable,  like  that  of  commodities  in 
general,  and  is  regulated  in  every  bargain  by  the  mutual  accord  of 
the  buyer  and  seller.  Silver  is  more  valuable  when  it  will  purchase 
a  large  quantity  of  commodities,  than  when  it  will  purchase  a  smaller 
quantity.  It  can  not,  therefore,  serve  as  a  measure,  the  first  requi- 
site of  which  is  invariability.  Thus,  in  the  assertion  of  Montes- 
quieu, when  speaking  of  money,  that  "  what  is  the  common  mea- 
sure of  all  things,  should  of  all  things  be  the  least  subject  to  change,"* 
there  are  no  less  than  three  errors  in  two  lines.  For,  in  the  first 
place,  it  has  never  been  pretended,  that  money  is  the  measure  of  all 
things,  but  merely  that  it  is  the  measure  of  values;  secondly,  it  is  not 
even  the  measure  of  values ;  and  lastly,  its  value  can  not  be  made 
invariable.  If  it  was  the  object  of  Montesquieu  to  deter  governments 
from  altering  the  standard  of  their  coin,  he  should  have  laboured 
to  enforce  those  sound  arguments,  which  the  question  would  fairly 
have  supplied  him  with,  instead  of  dealing  in  brilliant  expressions, 
which  serve  to  mislead  and  give  currency  to  error. 

It  would,  however,  often  be  a  matter  of  curiosity,  and  sometimes 
even  of  utility,  to  be  able  to  compare  two  values  at  an  interval  of 
time  or  place;  as,  for  instance,  when  there  is  occasion  to  stipulate 
for  a  payment  at  a  distant  place,  or  a  rent  for  a  long  prospective 
term. 

Smith  recommends  the  value  of  labour  as  a  less  variable,  and, 
consequently,  more  appropriate,  measure  of  absent  or  distant  value; 
he  reasons  thus  upon  the  matter:  "Equal  quantities  of  labour,  at  all 
times  and  places,  may  be  said  to  be  of  equal  value  to  the  labourer. 
In  his  ordinary  state  of  health,  strength,  and  spirits,  in  the  ordinary 
degree  of  his  skill  and  dexterity,  he  must  always  lay  down  the  same 
portion  of  his  ease,  his  liberty,  and  his  happiness.  The  price,  which 
lie  pays,  must  always  be  the  same,  whatever  may  be  the  quantity  of 
goods  which  ho  receives  in  return  for  it.  Of  them,  indeed,  it  may 
sometimes  purchase  a  greater  and  sometimes  a  smaller  quantity;  but 
it  is  their  value  which  varies,  not  that  of  the  labour  which  purchases 
them.  At  all  times  and  places,  that  is  dear,  which  it  is  difficult  to 
oome  at,  or  which  it  costs  much  labour  to  acquire ;  arid  that  cheap, 
which  is  to  be  had  easily,  or  with  very  little  labour.  Labour  alone, 
.herefore,  never  varying  in  its  own  value,  is  alone  the  ultimate  and 

*•  Esprit  des  Lois,  liv.  xxii.  c.  3. 


CHAP.  XXI.  ON  PRODUCTION. 


215 


real  standard,  by  which  the  value  of  all  commodities  can  at  all  times 
and  places  be  estimated  and  compared."* 

With  great  deference  to  so  able  a  writer,  it  by  no  means  follows, 
that,  because  labour  in  the  same  degree  is  always  to  the  labourer 
himself  of  the  same  value,  therefore  it  must  always  bear  the  same 
value  as  an  object  of  exchange.  Labour,  like  commodities,  may 
vary  in  the  supply  and  demand  ;  and  its  value,  like  value  in  general, 
is  determined  by  the  mutual  accord  of  the  adverse  interests  of  buyer 
and  seller,  and  fluctuates  accordingly. 

The  value  of  labour  is  affected  materially  by  its  quality.  The 
labour  of  a  strong  and  intelligent  person  is  worth  much  more  than 
that  of  a  weak  and  ignorant  one.  Again,  labour  is  more  valuable 
in  a  thriving  community,  where  there  is  a  lively  demand  for  it,  than 
in  a  country  overloaded  with  population.  In  the  United  States,  the 
daily  wages  of  an  artificer  amount  in  silver  to  three  times  as  much 
as  in  France-f  Are  we  to  infer,  that  silver  has  then  but  ^  of  its 
value  in  France  ?  The  artificer  is  there  better  fed,  better  clothed, 
and  better  lodged ;  which  is  a  convincing  proof,  that  he  is  really 
better  paid.  Labour  is  probably  one  of  the  most  fluctuating  o'f 
values,  because  at  times  it  is  in  great  request,  and  at  others  is  offered 
with  that  distressing  importunity  occasionally  witnessed  in  cities 
where  industry  is  on  the  decline. 

Its  value  has,  therefore,  no  better  title  to  act  as  a  measure  of  two 
values  at  great  distances  of  time  or  place,  than  that  of  any  other 
commodity.  There  is,  in  fact,  no  such  thing  as  a  measure  of  value, 
because  there  is  nothing  possessed  of  the  indispensable  requisite, 
invariability  of  value. 

In  the  absence  of  an  exact  measure,  we  must  be  content  to  ap- 
proximate to  accuracy ;  and,  to  this  end,  many  commodities  of  well 
known  value  will  serve  to  give  a  notion,  more  or  less  correct,  of  the 
value  of  any  specific  product  At  the  same,  point  of  time  and  place, 
there  is  little  difficulty  in  the  approximation :  the  value  of  any  given 
article  may  be  readily  measured  by  almost  all  others.  To  ascertain 

*  Wealth  of  Nations,  book  L  c.  5.  On  this  point,  Smith  observes,  that  "  labour 
was  the  first  price,  the  original  purchase-money,  that  was  paid  for  all  things.  It 
was  not  by  gold  or  silver,  but  by  labour,  that  all  the  wealth  of  the  world  was 
originally  purchased."  I  think  I  have  succeeded  in  proving  that  he  is  mistaken. 
Nature  executes  an  essential  part  of  the  production  of  values  ;  and  her  agency  is 
in  most  cases  paid  for,  and  forms  a  portion  of  the  value  of  the  product.  The 
profit  of  land,  which  is  called  rent,  is  paid  to  the  proprietor,  who  does  nothing 
himself,  and  stands  in  place  of  the  original  occupant;  and  it  affects  the  value  of 
the  product,  raised  by  the  joint  agency  of  nature  and  industry ;  the  portion  of 
value  contributed  by  nature  is  not  the  product  of  human  labour.  Capital  also, 
which  is,  for  the  most  part,  the  accumulated  product  of  labour,  concurs,  like 
nature,  in  the  business  of  production,  and  receives  in  recompense  a  portion  of 
the  product ;  but  the  gains,  accruing  to  the  capitalist,  are  quite  distinct  from  the 
accumulated  labour  vested  in  the  capital  itself,  which  can  be  expended  or  con- 
sumed in  tnto,  by  one  set  of  persons ;  while  its  share  in  the  product,  in  other 
word?,  the  interest  paid  for  its  use,  may  be  consumed  by  another. 

f  Humboldt  reckons  it  at  from  3  fr.  50  cents  to  4  fr.  of  our  money      Essai 
Pol.  sur  la  Noueelle  Espagnc,  torn.  iii.  p.  105.  oct.  ed. 
21  * 


246  ON  PRODUCTION.  BOOK  L 

pretty  nearly  the  value  of*  an  article  amongst  the  ancients,  we  must 
ilnd  out  some  article  which  there  is  reason  to  think  has  subsequently 
undergone  little  change  of  value,  and  then  compare  the  quantity  of 
that  article  given  by  the  ancients  and  moderns  respectively,  in  ex- 
change for  the  article  in  question.  Wherefore,  silk  would  be  a  bad 
object  of  comparison ;  because  it  was,  in  the  time  of  Caesar,  procura- 
ble from  China  only,  at  a  most  extravagant  expense,  and,  being  then 
nowhere  produced  in  Europe,  must  of  course  have  been  much  dearer 
than  at  present.  Is  there  any  commodity  that  has  varied  less  in  the 
intervening  period?  and,  if  there  be  any  such,  how  much  of  it  was 
then  given  for  an  ounce  of  silk  ?  These  are  the  two  points  we  must 
inquire  into.  If  any  one  article  can  be  discovered,  that  was  pro- 
duced with  equal  ease  and  perfection  at  the  two  periods,  and  the 
consumption  of  which  had  a  natural  tendency  to  keep  pace  with  its 
abundance,  this  article  would  probably  have  varied  little  in  value 
and  may  be  taken  as  a  tolerable  measure  of  other  values. 

Ever  since  the  earliest  times  recorded  in  history,  wheat  has  been 
the  staple  food  of  the  great  mass  of  the  population,  in  all  the  princi- 
pal nations  of  Europe  ;  consequently,  their  relative  population  must 
have  been  influenced  by  the  abundance  or  scarcity  of  this  article  of 
food,  more  than  of  any  other :  the  ratio  of  the  demand  to  the  supply 
must  have  been,  therefore,  at  all  times  nearly  the  same.  There  is, 
besides,  no  product  which  I  know  of,  that  has  undergone  less  altera- 
tion in  the  course  of  production.  The  agricultural  skill  of  the  an- 
cients was  in  most  respects  equal,  and  in  some,  perhaps,  superior  to 
our  own.  Capital,  indeed,  was  dearer  amongst  them ;  but  that  dif- 
ference was  little  felt ;  for,  in  ancient  times,  the  proprietor  was  com- 
monly both  farmer  and  capitalist ;  and  the  capital  embarked  in  agri- 
culture yielded  iess  return  than  other  investments ;  because,  as  more 
honour  was  attached  to  this,  than  to  the  other  branches  of  industry, 
commerce  and  manufacture,  the  influx  of  capital,  as  well  as  of  labour, 
into  that  channel,  was  greater  than  into  the  other  two.  And,  during 
the  middle  ages,  in  spite  of  the  general  declension  of  all  the  arts,  the 
tillage  of  arable  land  was  prosecuted  with  a  skill  little  inferior  to  that 
of  the  present  day. 

Whence  I  infer,  that  the  same  quantity  of  wheat  must  have  borne 
nearly  the  same  value  among  the  ancients,  during  the  middle  ages 
and  at  the  present  time.  But,  as  there  has  all  along  been  a  vast  dif- 
ference in  the  produce  of  the  harvest  in  one  year  and  another,  grain 
being  sometimes  so  abundant,  as  to  sell  extremely  low,  and  at  other 
times  so  scarce,  as  to  occasion  famine,  the  value  of  grain  must  be 
taken  on  an  average  of  years,  whenever  it  is  made  the  basis  of  any 
calculation. 

So  much  for  the  estimation  of  values  at  distant  periods  of  time. 

There  is  equal  difficulty  in  the  estimation  at  great  distances  of 
place.  The  staple  articles  of  national  food,  which,  as  such,  maintain 
t.he  greatest  uniformity  in  the  ratio  of  the  demand  and  supply,  are 
'•ery  different  in  different  climates.  In  Europe,  wheat  is  the  staple  ; 
:n  Asia,  it  is  rice :  the  relative  value  of  neither  the  one  nor  the  other 


CHAP.  XXL  ON  PRODUCTION.  247 

in  Asia  and  Europe  is  tolerably  steady;  nor  has  the  value  of  rice  in 
Asia  any  relation  to  the  value  of  wheat  in  Europe.  Rice  is  beyond 
question  less  valuable  in  India,  than  wheat  is  in  this  part  of  the 
world ;  for,  besides  that  the  cultivation  is  less  expensive,  it  yields 
two  crops  in  the  year.  This  is  one  reason,  why  labour  is  so  cheap 
in  India  and  China. 

The  article  of  food  in  most  general  use  is,  therefore,  but  a  bad 
measure  of  value  at  great  distances  of  place.  Nor  are  the  precious 
metals  by  any  means  a  correct  one:  their  value  is  indubitably  not  so 
great  in  North  America  and  the  West  Indies,  as  in  Europe,  and 
much  greater  in  every  part  of  Asia,  as  the  constant  efflux  of  specie 
thither  sufficiently  proves.  Yet  the  frequency  of  communication 
between  these  different  parts  of  the  world,  and  the  facility  of  trans- 
port, give  us  reason  to  suppose  them  the  least  liable  to  fluctuation  of 
value  on  their  passage  from  one  climate  to  another. 

There  is  happily  no  necessity,  for  the  purposes  of  commerce,  to 
compare  the  relative  value  of  goods  and  of  metals  in  two  distant 
parts  of  the  world ;  it  is  quite  enough  to  know  their  relation  to 
other  commodities  in  each  country.  When  a  merchant  remits  to 
China  half  an  ounce  of  silver,  it  is  of  little  importance  to  him,  whe- 
ther it  has  more  relative  value  in  China  than  in  Europe.  All  he 
wants  to  know  is,  whether  he  can  buy  with  it  at  Canton  a  pound  of 
tea  of  a  certain  quality,  which  he  can  re-sell  in  Europe,  say  for  two 
ounces  of  silver.  With  these  data,  and  in  expectation  of  receiving, 
at  the  close  of  the  speculation,  a  gross  profit  of  an  ounce  and  a  half 
of  silver,  he  calculates  whether  that  profit  will  leave  him  a  sufficient 
net  profit,  after  covering  the  charge^  and  risk  out  and  home ;  and 
this  is  all  he  cares  about.  If,  instead  of  bullion,  he  remit  goods,  it 
is  enough  for  him  to  know ;  1.  The  relation  between  the  value  of 
these  goods  and  silver  in  Europe;  that  is  to  say,  how  much  they 
will  cost ;  2.  The  relation  between  their  value  and  that  of  Chinese 
products  at  Canton ;  that  is  to  say,  what  he  can  get  in  exchange  for 
them;  and,  lastly,  the  relation  between  these  latter  and  silver  in 
Europe ;  that  is  to  say,  what  they  will  be  worth  when  imported.  It 
is  evident  that  every  repetition  of  this  operation  brings  into  question 
nothing  more  than  the  relative  value  of  two  or  more  articles  at  the 
same  time,  and  at  the  same  place. 

For  the  common  purposes  of  life,  or,  in  other  words,  when  no- 
thing more  is  requisite,  than  to  compare  the  value  of  two  objects,  at 
no  great  distance  of  time  or  place,  most  commodities  possessed  of 
any  value  at  all  may  serve  as  a  measure ;  and  if,  in  describing  the 
value  of  an  object,  even  where  there  is  no  question  of  either  buying 
or  selling,  the  estimation  is  more  generally  made  in  the  precious 
metals,  or  in  money,  than  in  any  other  commodity ;  it  is  simply,  be- 
cause its  value  is  more  generally  known,  than  that  of  other  com- 
modities.* But,  in  all  bargains  for  a  long  prospective  period,  as  for 

*  The  difference  of  value  in  different  objects  has,  throughout  this  work,  been 
noted  in  money-price  or  what  they  will  fetch  in  money ;  extreme  correctness  not 


248  ON  PRODUCTION.  BOOK  t 

the  reservation  of  a  perpetual  rent,  it  is  more  advisable  to  reckon  in 
wheat :  for  the  discovery  of  a  single  mine  might  perhaps  greatly  re- 
duce the  present  value  of  silver ;  whereas  the  tillage  of  all  North 
America  could  not  sensibly  alter  the  value  of  wheat  in  Europe :  for 
the  number  of  mouths  to  be  fed  in  America,  would  increase  almost 
in  the  ratio  of  the  improved  cultivation.  But  long  prospective 
stipulations  regarding  value  must  unavoidably,  under  any  circum- 
stances, be  very  precarious,  and  can  never  give  any  certain  notion 
of  the  value  that  is  likely  to  be  received.  Perhaps  the  most  im- 
provident course  of  all  is,  to  stipulate  for  a  particular  denomination 
of  money ;  for  the  same  denomination  may  be  fixed  to  any  variation 
of  weight  or  quality  whatever  ;  and  the  contracting  party  may  find 
he  has  bargained  for  a  name,  rather  than  a  value,  and  that  he  runs 
the  risk  of  paying,  or  being  paid,  in  mere  words. 

I  have  dwelt  thus  long  upon  the  refutation  of  incorrect  expres- 
sions, because  they  appear  to  have  acquired  too  general  a  circula- 
tion,* and  because  they  often  confirm  people  in  false  notions  and  ideas 
which  ideas  sometimes  serve  as  the  basis  of  erroneous  systems,  that 
in  their  turn  give  birth  to  conduct  equally  erroneous. 


SECTION  VII. 

Of  a  Peculiarity  that  should  be  attended  to,  in  estimating  the  Sums 
mentioned  in  History. 

tn  reducing  the  money  of  former  ages  into  money  of  the  present 
day,  the  best  informed  historians  have  contented  themselves  with 
converting  the  actual  quantity  of  gold  and  silver,  designated  by  the 
term  made  use  of  by  the  authority  cited,  into  the  current  money  of 
their  own  times.  But  this  is  not  enough :  the  actual  sum,  the  real 
amount  of  the  metal,  can  give  no  correct  notion  of  its  then  value, 
which  is  the  very  point  we  want  to  arrive  at.  It  is,  therefore,  ne- 
cessary to  reckon,  besides,  the  fluctuations  of  value  that  the  metal 
itself  has  undergone. 

A  few  examples  will  best  explain  my  meaning : 

Voltaire  tells  us,  in  his  Essay  on  Universal  History  ,f  that  Charles 
V.  enacted,  that  the  sons  of  France  should  have  an  annual  revenue 
settled  on  them  of  12,000  livres:  and,  as  he  reckons  this  sum  to  be 
equal  to  100,000  livres  of  the  present  day,  he  naturally  enough  ob- 
serves, that  this  was  no  great  provision  for  the  sons  of  the  monarch. 
But  let  us  examine  the  grounds  for  this  calculation  of  Voltaire. 

being  necessary  for  illustration.  Even  in  the  exact  science  of  geometry,  the 
figures  are  given  merely  to  make  the  demonstrations  more  intelligible ;  suiet 
accuracy  is  necessary  in  the  reasoning  and  conclusions  only. 

*  After  the  appearance  of  three  editions  of  this  work,  Sismondi  published  his 
Nouveaux  Principes  d"Econ.  Pol. ;  wherein  amongst  many  excellent  chapters, 
there  is  one  entitled,  "  money,  the  sign,  token,  and  measure  of  value."  lav.  v.  c.  3. 

•t  Edit,  de  Kehl,  oct.  torn.  xvii.  p.  394. 


CHAP.  XXL  ON  PRODUCTION. 

First,  he  reckons  that  the  mark  of  fine  silver  was,  in  the  time  of 
Cliarles  V.,  worth  about  Q  livres;  at  this  rate,  12,000  livres  will 
make  2000  marks  of  silver,  which,  at  their  relative  value  at  the  date 
of  Voltaire's  writing,  would  in  fact  amount  to  100,000  livres,  or 
thereabouts.  But  2000  marks  of  fine  silver  were  worth  in  the  reign 
of  Charles  V.  much  more  than  in  the  reign  of  Louis  XV.  Of  this 
we  shall  be  convinced,  by  a  comparison  of  the  relative  average  at  the 
two  different  periods,  of  pure  silver  to  wheat,  which  we  will  take  as 
one  of  the  least  variable. 

Dupre  of  St.  Maur,  whose  book*  is  an  ample  repository  of  learned 
information  upon  the  value  of  commodities,  gives  it  as  his  opinion, 
that,  from  the  reign  of  Philip  Augustus,  who  died  A.  D.  1223,  until 
about  the  year  1520,  the  seller  of  wheat  (Paris  measure)  was  worth, 
on  the  average,  as  much  as  1-9  of  a  mark  of  fine  silver ;  i.  e.  about 
512  'grains  weight. 

About  the  year  1536,  when  the  mark  of  silver  was  of  the  value  of 
13  liores  tournois,  or  rather  passed  under  the  denomination  of  13 
livres  tournois,  the  ordinary  price  of  a  setier  of  wheat  was  about  3 
livres  tournois,  i.  e.  3-13  of  a  mark  of  fine  silver,  amounting  to  1063 
grains  weight  of  that  metal. 

In  1602,  under  the  reign  of  Henry  IV.,  the  mark  of  fine  silver 
being  at  that  time  equal  to  22  livres,  the  average  price  of  the  setter 
of  wheat  was  Qliv.  16s.  9cL;  i.  e.  2060  grains  of  fine  silver.f 

Since  that  period,  the  setier  of  wheat  has,  one  year  with  another, 
been  constantly  worth  about  the  same  weight  of  silver.  In  1789, 
when  the  mark  was  equivalent  to  54liv.  19s.  the  average  price  of 
wheat  was,  according  to  Lavoisier,  24liv.  the  setier,  i.  e.  2012 
grains  of  fine  silver.  I  have  not  reckoned  the  fractions  of  grains, 
for  in  these  matters  it  is  enough  to  approximate  to  accuracy ;  in- 
deed the  price  of  the  setier,  taken  at  the  average  of  Paris  and  the 
environs,  is  itself  but  loosely  calculated. 

The  result  of  this  comparative  statement  is,  that  the  setier  of 
wheat,  whose  relative  value  to  other  commodities  has  varied  little 
fron<  1520  down  to  the  present  time,  has  undergone  great  fluctua 
tions,  being  worth, 

A.  D.  1520     -     -       512  gr.  of  pure  silver. 
1536     -     -     1063  do.         do. 
1602     -     -     2060  do.         do. 
1789     -     -     2012  do.         do. 

which  shows  that  the  value  of  pure  silver  must  have  varied  consi- 
derably since  the  first  of  these  dates ;  inasmuch  as  on  every  act  of 
exchange,  four  times  as  much  of  it  must  now  be  given  for  the  same 
quantity  of  commodities,  as  was  given  three  centuries  ago.  We 
shall  see  by-and-by,J  why  the  discovery  of  the  American  mines,  and 

*  Rapport  entre  F  Argent  et  les  Denrees,  p.  85. 

f  For  these  calculations  I  am  indebted  to  the  Essai  sur  les  Monnaies,  as  A  thu 
Variations  dans  les  Prix,  both  by  Dupre  de  Saint  Maur. 

t  Book  II.  Chap.  4. 

2G 


250  ON  PRODUCTION.  BOOK  I. 

the  influx  into  the  market  of  about  ten  times  as  much  silver  as 
before,  has  operated  to  reduce  its  value  only  in  the  ra'tio  of  4  to  1. 

Now  to  the  application  of  this  information  to  the  royal  stipend  in 
question :  if  pure  silver  was  worth  in  the  time  of  Charles  V.  four 
times  as  much  as  in  the  age  of  Voltaire,  the  settlement  of  2000  marks 
upon  the  sons  of  France  was  equivalent  to  8000  marks  at  the  pre- 
sent, that  is  to  say,  more  than  400,000  /r.  of  our  present  currency, 
or  about  75,000  dollars ;  which  makes  the  observations  of  Voltaire 
upon  the  inadequacy  of  the  provision  much  less  applicable. 

Raynal,  though  he  wrote  avowedly  upon  commercial  matters,  has 
committed  a  similar  error,  in  estimating  the  public  revenue  in  the 
reign  of  Louis  XII.  at  36  millions  of  our  present  money  (francs)  on 
the  ground,  that  it  amounted  to  7,650,000  liv.  of  11  liv.  to  the  mark 
of  silver.  The  sum,  indeed,  was  equal  to  695,454  marks  of  silver : 
but  it  would  not  be  enough  merely  to  reduce  the  mark  into  livres  of 
the  present  day;  for  the  same  quantity  of  silver  was  then  worth  four 
times  as  much  as  it  is  now ; .  so  that,  before  reducing  them  into 
modern  money,  they  should  be  multiplied  by  four,  which  will  swell 
the  public  revenue  under  Louis  XII.  to  a  sum  of  144  millions  of 
francs  of  present  currency,  or  nearly  27  millions  of  dollars. 

Again,  we  read  in  Suetonius,  that  Cassar  made  Servilius  a  present 
of  a  pearl  worth  6  millions  of  sestertii,  which  his  translators,  La 
Harpe  and  Levesque,  estimate  to  be  equal  to  1,200,000  fr.  present 
money.  But  a  little  lower  down,  we  find,  that  Cassar,  on  his  return 
to  Italy,  disposed  of  the  gold  bullion,  accruing  from  the  plunder  of 
Gaul,  for  coin,  at  the  rate  of  3000  sestertii  to  the  pound  of  gold ; 
which  shows  the  pearl  of  Servilius  to  have  been  much  under-rated. 
The  Roman  pound,  according  to  Le  Blanc,  weighed  10s  of  our 
ounces ;  and  10  f  oz.  of  gold  in  Caesar's  time,  were  worth  as  much 
as  32  ounces  of  that  metal  at  the  present  day,  for  it  may  reasonably 
be  reckoned,  that  the  value  of  gold  has  fallen  in  the  ratio  of  3  to  1.* 
Now  32  oz.  of  gold  are  worth  nearly  3036  fr.  which  may  therefore 
be  looked  upon  as  about  the  real  value  of  3000  sestertii ;  at  which 
rate  the  pearl  in  question  must  have  been  worth  6,072,000  fr. 
(1,129,392  dollars,)  and  the  Roman  sestertius,  somewhat  more  than 
a  franc  of  our  money;  which  is  greatly  beyond  the  ordinary  esti- 
mate.f 

*  12  oz.  of  silver  were  given  for  1  oz.  of  gold,  in  Caesar's  time.  Where- 
tbre,  silver  having  fallen  in  the  ratio  of  4  to  1,  1  oz.  of  gold  was  worth  as  much 
in  his  days,  as  48  oz.  of  pure  silver  at  the  present  period.  But  48  oz.  of  silver 
are  now  worth  3  oz.  of  gold  or  thereabouts :  so  that  gold  must  have  fallen  in  the 
ratio  of  about  3  to  1. 

f  The  same  error  of  calculation  has  led  these  translators  involuntarily  to 
underrate  the  prodigality  of  the  worst  of  the  emperors.  Thus  we  are  told,  that 
Caligula,  in  less  than  a  year,  squandered  the  whole  of  the  treasure  accumulated 
l»V  Tiberius,  amounting  to  2700  millions  of  sestertii,  which  La  Harpe  translates 
into  no  more  than  540  millions  of  livres:  whereas,  supposing  the  value  of  gold 
to  have  varied  little  between  the  days  of  Caesar  and  of  Caligula,  which  is  pro- 
.rnble  enough,  if.  will  be  found  to  amount  to  very  nearly  3000  millions  of  livres. 


CHAP.  XXI.  ON  PRODUCTION.  251 

When  Caesar  laid  hands  upon  the  public  treasures  of  Rome,  in 
spite  of  the  opposition  of  the  tribune  Metellus,  he  is  stated  to  have 
found  them  to  consist  of  4130  Ibs.  of  gold,  and  80,000  Ibs.of  silver; 
which  Vertot  estimates  to  have  amounted  to  2,911,100  liv.  tourn.; 
but  upon  what  grounds  I  am  at  a  loss  to  imagine.  To  form  a  tole- 
rably correct  notion  of  the  treasure  seized  by  Csesar  upon  his  usurp- 
ation, the  4130  Ibs.  of  gold  should  be  reduced  into  oz.  of  the  French 
standard,  at  the  rate  of  10]  oz.  to  the  Roman  lb.*  which  makes 
44,052  oz.  But,  as  the  same  weight  of  gold  was  then  worth  three 
times  as  much  as  at  present,  the  value  will  appear  to  have  been 
132,156  oz.  or  12,530,346  fr.  (2,330,644  dollars,)  supposing  the 
standard  of  quality  in  the  gold  to  have  been  the  same  as  at  present. 
The  80,000  Ibs.  weight  of  silver  also  were  then  worth  as  much  as 
320,000  Ibs.  at  the  present  period,  i.  e.  20,915,735  fr.,  (3,890,327 
dollars,)  reckoning  the  Roman  lb.  at  lOij  oz.  and  taking  the  stand- 
ard of  quality  to  have  been  the  same.  Wherefore,  the  sum  appro- 
priated by  the  usurper  amounted  to  33,446,081  fr.  (6,232,971  dol- 
lars,) of  our  money ;  which  is  greatly  above  Vertot's  estimate  of 
about  3  millions  only. 

From  this  specimen  we  may  judge,  how  little  reliance  can  be 
placed  on  the  calculations  of  other  historians,  of  less  information  and 
accuracy  than  those  I  have  been  quoting.  Rollin,  in  his  Ancient, 
and  Fleury,  in  his  Ecclesiastical  History,  have  reckoned  the  talen- 
tum,  mina  and  sestertius,  according  to  the  scale  made  out  by  some 
learned  persons,  under  the  administration  of  Colbert.  This  scale  is 
liable  to  many  objections :  1.  It  establishes  upon  very  questionable 
data,  the  respective  quantities  of  the  precious  metals  contained  in 
the  coins. of  the  ancients,  which  is  a  primary  source  of  error :  2.  The 
value  of  the  precious  metals  has  considerably  varied,  between  the 
period  of  antiquity  in  question  and  the  ministry  of  Colbert,  which 
is  another  source  of  error :  3.  The  scale  of  reduction,  drawn  up  under 
the  direction  of  that  minister,  was  calculated  at  the  rate  of  26  liv.  10 
sous,  to  the  mark  of  silver,  being  the  then  mint  price  of  silver  bul- 
lion ;  but  this  rate  was  altered  before  the  days  of  Rollin,  which  is  a 
third  source  of  error.  Lastly,  since  the  date  of  his  publication,  that 
rate  has  been  still  further  altered,  and  a  ttvres  tournais,  conveys  to 
us  the  idea  of  a  smaller  quantity  of  silver,  than  it  did  in  his  time ; 

Indeed,  it  seems  hardly  possible,  that  a  less  sum  would  have  sufficed  for  the 
monstrous  extravagancies  recorded  of  him. 

Horace,  Epist.  2.  lib.  ii.  speaks  of  an  estate,  that,  from  the  context,  must 
have  been  a  considerable  one,  as  being  of  the  value  of  300,000  sestertii,  which, 
according  to  my  view,  amounted  to  303,600  fr.  (about  56,470  dollars)  of  our 
present  money.  His  commentator,  Dacier,  perverts  the  meaning  of  the  passage, 
by  estimating  the  estate  in  question,  at  22,500  ft.  only,  or  4185  dollars. 

*  Le  Blanc.  Traite  Monnaies,  p.  3.  estimates  the  Roman  lb.  of  12  oz.  at  the 
actual  weight  of  only  lOf  oz.  of  our  standard,  taking  as  a  guide,  the  weight 
of  some  of  the  coins  of  the  emperors  which  are  in  a  state  of  high  preservation 
The  valuation  I  have  here  given  of  the  oz.  of  gold,  takes  it  at  the  mint  standard , 
viz.  with  a  proportion  of  TV  alloy;  for  I  take  it  for  granted,  that  the  gold,  thus 
'aid  hands  upon  by  Caesar,  wa.s  not  pure  gold,  but  coin  with  a  mixture  of  ahoy. 


252  ON  PRODUCTION.  BOOK  L 

and  this  is  a  fourth  source  of  error.  Thus,  whoever  now  takes  up 
that  work,  relying  on  the  calculations  therein  contained,  will  enter- 
tain a  most  erroneous  idea  of  the  income  and  expenditure  of  the 
states  of  antiquity,  as  well  as  of  their  commerce,  their  resources, 
and  every  part  of  their  system  and  organization. 

Not  that  I  would  be  understood  to  say,  that  a  writer  of  history 
can  ever  have  sufficient  data,  to  give  his  readers,  in  all  cases,  a  cor- 
rect notion  of  values  in  general ;  but,  for  the  sake  of  a  closer  ap- 
proximation to  accuracy,  than  has  hitherto  been  effected,  in  reducing 
the  sums  of  ancient  times,  and  even  of  the  middle  ages,  into  modern 
money,  I  would  recommend,  what  indeed  is  generally  done,  first,  to 
inquire  from  those  learned  in  antiquity,  the  actual  weight  of  precious 
metal  contained  in  the  coin  in  question:  secondly,  as  far  back  as  the 
Emperor  Charles  V.,  that  is  to  say,  about  the  year  1520,  that 
quantity,  if  gold,  must  be  multiplied  by  3  only,  and  if  silver,  by  4:* 
because  the  discovery  of  the  American  mines  has  occasioned  a  fall 
in  nearly  that  proportion:  and  lastly,  to  reduce  that  quantity  of  gold 
or  silver  into  the  current  money  of  the  period,  at  which  he  may 
happen  to  be  writing. 

From  the  year  1520  downwards,  the  value  of  silver  progressively 
declined  until  the  latter  end  of  the  reign  of  Henry  IV.,  that  is  to 
say,  towards  the  beginning  of  the  seventeenth  century.  We  may 
judge  of  the  depression  of  its  value  by  the  increasing  price  of  any 
given  commodity,  in  the  manner  explained  in  the  preceding  section. 
To  acquire  a  correct  notion  of  the  value  of  the  mark  of  silver  during 
this  period,  it  will  be  necessary  to  allow  for  a  diminution  in  the  ratio 
of  the  increased  real,  that  is,  metal,  and  not  nominal  or  coin,  price 
of  commodities  in  general,  or  of  any  one,  as  wheat,  for  instance,  in 
particular. 

From  the  beginning  of  the  seventeenth  century,  there  will  be  no 
occasion  for  any  further  allowance,  after  having  reduced  the  money 
of  the  time  being  into  marks  of  silver;  for  there  does  not  appear  to 
have  been  any  further  sensible  decline  in  the  value  of  silver,  since 
most  commodities  have  been  procurable  for  the  same  metal-price. 
It  will  be  sufficient,  therefore,  to  reduce  them  into  the  money  current 
for  the  time  being,  according  to  the  then  current  value  of  the  mark 
of  fine  silver.f 

*  Until  the  period  specified,  the  ratio  of  gold  to  silver  in  Europe  was  1  to  12. 
At  present,  it  is  in  most  nations  of  Europe  1  to  14,  or  1  to  15 ;  so  that  taking 
the  average  ratio  in  ancient  times  at  1  to  11}  and  in  modern  times  at  1  to  15, 
pola  will  have  increased  in  relative  value  to  silver  in  the  proportion  of  4  to  3. 
Wherefore,  if  gold  be  multiplied  by  3,  and  silver  by  4,  the  result  will  be  equal. 

f  I  am  disposed  to  believe,  that  the  value  of  both  gold  and  silver  began  again 
to  decline  about  the  commencement  of  the  present  century  ;  for  more  gold  and 
silver  are  now  given  for  most  of  the  commodities  least  liable  to  vary  in  the 
costs  of  production.  (1) 

(1)  In  the  very  able  and  laborious  'Historical  Inquiry  into  the  Production 
and  Consumption  of  the  Precious  Metals,  by  William  Jacobs,  Esq.  F.  R.  S.  Lon- 
don, 1831,"  we  are  furnished  with  a  chapter  (xxv.)  on  the  production  of  jfold 


CHAP.  XXI.  ON  PRODUCTION.  253 

By  way  of  illustration,  let  us  take  the  statement  \ve  find  in  the 
Memoirs  de  Sully,  viz.  that  this  minister  accumulated,  in  the  vaults 
of  the  Bastile,  a  sum  of  36  millions  of  livres  tournois,  to  further  the 
designs  of  his  master  against  the  house  of  Austria.  If  we  wish  to 
know  the  actual  value  of  that  hoard,  we  must,  in  the  first  place, 
examine  what  weight  of  fine  silver  it  amounted  to.  The  mark  of 
fine  silver  was  then  represented  by  22  livres  tournois;  consequently 
30  millions  of  livres  make  1,636,363  marks,  5  oz.  of  silver.  There 
has  been  no  sensible  variation  in  the  value  of  that  metal  since  the 
period  in  question;  for  the  same  quantity  of  •metal  would  then  buy 
ihe  same  quantity  of  wheat  as  at  present.  Now,  at  the  present  time, 
1,636,363  marks  5  oz.,  or,  in  other  terms,  399,588,018,  5  grammes 

and  silver  from  the  end  of  the  year  1809  to  the  end  of  1829.  The  author  re- 
marks, "  that  it  was  at  the  first  named  period,  1809,  when  a  great  change  took 
place  in  the  production  of  the  mine»  of  gold  and  silver,  in  every  part  of  the 
western  continent,  after  a  space  of  more  than  three  centuries,  during  the  whole 
of  which  there  had  been  a  constant  increase  of  the  quantities  obtained  ;  each 
succeeding  decennial  period  yielding  a  larger  portion  than  the  similar  number 
of  years  that  preceded  it;  and  though  they  have  in  some  measure  been  restored, 
it  has  been  by  slow  degrees,  and  they  are  yet  very  far  from  having  approached 
the  copious  produce  which  they  yielded  before  thoir  genera]  abruption  from 
European  government." 

After  then  examining  the  productiveness  of  the  mines  of  Mexico,  Colombia, 
including  New  Grenada,  Peru,  Buenos  Ayres,  Chili,  and  Brazil,  in  gold  and 
silver,  and  also  after  taking  notice  of  the  gold  found  in  North  and.  South  Caro- 
lina and  Georgia,  from  1824  to  1830,  he  sums  up  the  whole  of  the  amount  of 
the  gold  and  silver  supplied  by  the  late  Spanish  dominions  in  America,  during 
the  twenty  years,  from  the  end  of  the  year  1809  to  the  end  of  1829,  thus : — 

Divisions.  Amount  in  dollars  in  twenty  years. 

Mexico, 220,043,200 

Guatimala, 2,993,710 

Colombia,      33,564,267 

Peru, 64,688,429 

Buenos  Ayres, 30,000,000 

Chili, 16,618,880 


367,808,486 

Or  in  sterling,  at  4s.  2d.  the  dollar,          1. 76,626,768 
To  this  may  be  added  the  produce  of 

Brazil,     --. 4,110,000 

Whole  produce  of  America,     -    -    -      Z.80,736,768 

"  In  Europe,"  he  states,  likewise,  "  the  produce  of  gold  and  silver  has  de- 
clined, when  the  average  of  the  last  twenty  years  is  compared  with  that  of  the 
one  hundred  and  ten  years  which  preceded  it.  The  value  of  the  gold  produced 
in  Europe,  he  estimates  about  720.000Z.  and  of  the  silver  530,000?.,  being  to- 
gether 1,25(),OOOZ.  annually,  or  in  the  period  of  twenty  years  from  1810  to  1829. 
23  millions;  to  this  the  supply  from  America,  80,736,768/.,  will  make  together, 
103,736,768  pounds  sterling."  Mr.  Jacobs  estimates  the  diminution  in  the 
mass  of  metallic  money,  during  the  twenty  years  mentioned,  at  13  per  cent 

AMERICAN  EDITOR 
22 


254  ON  PRODUCTION.  BOOK  I. 

of  fine  silver,  coined  into  money,  will  make  exactly  88,797,315  fr. 
or  16,516,300  dollars.  A  sum,  indeed,  that  would  go  no  great  way 
in  modern  warfare  ;  but  it  must  be  considered,  that  war  is  now  con- 
ducted on  a  very  different  principle,  and  has  become  infinitely  more 
wasteful,  in  reality  as  well  as  in  name. 


SECTION  VIII. 
Of  the  Absence  of  any  fixed  ratio  of  Value  between  one  Metal  and  another. 

The  same  error,  which  led  public  functionaries  to  believe,  that 
they  could  fix  the  relative  value  of  any  metal  to  commodities,  has 
also  induced  them  to  determine  by  act  of  law  the  relative  value  of 
the  metals  employed  as  money,  one  to  the  other.  Thus,  it  has  been 
arbitrarily  enacted,  that  a  given  quantity  of  silver  shall  be  worth  24 
liv.,  and  that  a  given  quantity  of  gold  shall  likewise  be  wrorth  24  liv. 
In  this  manner,  the  ratio  of  the  nominal  value  of  gold  to  that  of  sil- 
ver came  to  be  legally  established. 

The  pretension  of  authority  was  in  both  cases  equally  vain  and 
impotent ;  and  what  has  been  the  consequence  ?  The  relative  value 
of  the  two  metals  to  other  commodities  has,  in  fact,  been  constantly 
fluctuating,' as  well  as  the  relative  value  of  the  metals  themselves, 
when  exchanged  one  for  the  other.  Before  the  re-coinage  of  gold, 
in  pursuance  of  the  arret  of  13th  October,  1785,  the  louis  d'or  was 
commonly  sold  for  25  liv.  and  some  sous  of  the  silver  coin.  Con- 
sequently, people  took  good  care  not  to  pay  in  gold  coin  the  sums 
bargained  for  in  silver ;  otherwise  they  would  really  have  paid  25 
liv.  and  8  or  10  sous,  for  every  24  liv.  of  the  sums  stipulated. 

Since  the  re-coinage  in  1785,  when  the  quantity  of  gold  in  the 
louis  d'or  was  reduced  by  one-sixth,  its  value  has  nearly  kept  pace 
with  that  of  24  liv.  in  silver;  so  that  gold  and  silver  have  been  paid 
indifferently.  However,  it  has  still  continued  most  customary  to 
pay  in  silver,  partly  from  long  habit,  and  partly  because  the  gold 
coin,  being  more  liable  to  be  clipped  or  counterfeited,  was  received 
with  more  caution  and  liable  to  more  frequent  cavils  about  the  weight 
and  quality. 

In  England  a  different  arrangement  has  produced  an  effect  directly 
contrary.  In  the  year  1728,  the  natural  course  of  exchange  fixed 
the  relative  value  of  gold  to  silver  as  ISy!*  to  1 ;  say  15iV  to  1,  for 
the  sake  of  simplicity;  1  oz.  of  gold  was  sold  for  I5i\  oz.  of  silver 
and  vice  versa.  Accordingly  that  ratio  was  established  by  law 
1  oz.  of  gold  being  coined  into  the  nominal  sum  of  37.  17s.  10|d. 
and  15rV  oz.  of  silver  into  the  same  sum.  Thus,  the  government 
attempted  permanently  to  fix  a  ratio,  that  is,  in  the  nature  of 
things,  perpetually  varying.  The  demand  for  silver  gradually 
increased ;  its  use  for  plate  and  other  domestic  purposes  became 
more  general  the  India  trade  received  an  additional  stimulus 


CHAP.  XXL  ON  PRODUCTION.  255 

am  took  off  silver  in  preference  to  gold,  for  this  reason,  that  the 
relative  value  of  silver  to  gold  is  higher  in  the  East  than  in  Europe ; 
so  that,  by  the  end  of  the  last  century,  the  ratio  of  these  metals  one 
to  the  other  in  England  became  about  14^  to  1  only;  and  the  same 
quantity  of  silver,  that  was  coined  into  31.  17s.  lO^rf.,  would  then  sell 
in  the  market  for  4L  in  gold.  There  was  thus  a  profit  on  melting 
down  the  silver,  and  a  loss  on  payments  in  that  metal ;  for  which 
'eason,  thenceforward,  until  the  parliamentary  suspension  of  specie 
payments  by  the  Bank  of  England  in  1797,  payments  of  course  were 
commonly  made  in  gold. 

Since  1797,  all  payments  have  been  made  in  paper.  But,  if 
England  shall  return  to  a  metallic  currency,  framed  upon  the  former 
monetary  principles  and  regulations,  it  is  probable  that  payments 
will  be  made  in  silver  instead  of  gold,  as  before  the  suspension;  for 
gold  has  risen  in  relative  price  to  silver  in  the  English  market,  pro- 
bably in  consequence  of  the  large  export  of  specie  for  commercial 
purposes,  and  greater  difficulty  of  prevention  in  gold  than  in  silver. 
Gold  bullion  in  the  English  market  is  now  to  silver  bullion  in  the 
ratio  of  about  1  to  15^,  although  the  mint  ratio  is  still  1  to  15TV.  A 
payment  in  gold  instead  of  silver  would  therefore  be  a  gratuitous 
sacrifice  of  the  difference  between  15,-V  and  15^. 

Hence  may  be  drawn  this  conclusion ;  that  it  is  impossible  in  prac- 
tice to  assign  any  fixed  ratio  of  exchangeable  value  to  commodities 
whose  ratio  is  for  ever  fluctuating,  and,  therefore,  that  gold  and  silver 
must  be  left  to  find  their  own  mutual  level,  in  the  transactions  in 
which  mankind  may  think  proper  to  employ  them.* 

The  above  remarks  upon  the  relative  value  of  gold  and  silver  are 
equally  applicable  to  silver  and  copper,  as  well  as  to  all  other  metals 
whatever.  There  is  no  more  propriety  in  declaring,  that  the  copper 
contained  in  twenty  sous  shall  be  worth  the  silver  contained  in  a 
livre  tournois,  than  in  enacting,  that  the  silver  contained  in  24  liv. 
tournois  shall  be  worth  the  gold  in  a  louis  (for.  However,  little 
mischief  has  been  occasioned  by  fixing  the  ratio  of  copper  to  the 
precious  metals,  because  the  law  does  not  authorize  the  payment  of 
sums  stipulated  in  livres  tournois  and  francs  in  either  copper  or 
the  precious  metals  indifferently ;  so  that,  in  reality,  the  only  metal 
money  recognised  by  law  as  legal  tender,  for  sums  above  the  value 
of  the  lowest  denomination  of  silver  coin,  is  silver  or  gold. 

*  The  relative  position  of  gold  and  silver,  in  respect  to  value,  is  by  no  means 
determined  by  the  respective  supply  of  each  from  the  mines.  Humboldt  states, 
in  his  Essai  Pol.  sur  la  Nouvelle  Espagne,  torn.  iv.  p.  222,  oct.,  that  silver  is 
produced  from  the  mines  of  America  and  Europe  jointly,  in  the  ratio  to  gold,  of 
45  to  1.  Now  the  ratio  of  their  value,  instead  of  being  45  to  1,  is  only, 
In  Mexico,  -----  15J  -  -  -  -  to  1 

France, lo£    -----    1 

China,  -    -    -     -      from  12  to  13  -    -    -    -     1 

Japan, 8  to  9    -    -    -    -     1 

The  difference  is  probably  owing  to  the  superior  utility  and  demand  of  silver  tot 
the  purposes  of  plate,  &c.  as  well  as  of  money.  It  would  seem,  that  this  cans* 
operates  more  forcibly  in  the  East  than  in  the  West ;  for  gold  jewellery  is  rela 
tively  cheaper  there  than  in  our  part  of  the  world. 


ON  PRODUCTION.  Boo*  L 


SECTION  IX. 
Of  Money  as  it  ought  to  be. 

rom  all  that  has  been  said  in  the  preceding  sections  may  be 
inferred  my  opinion  of  what  money  ought  to  be. 

The  precious  metals  are  so  well  adapted  for  the  purposes  of 
money,  as  to  have  gained  a  preference  almost  universal ;  and,  as  no 
other  material  has  so  many  recommendations,  no  change  in  this 
particular  is  desirable. 

So  also  of  their  division  into  equal  and  portable  particles.  They 
may  very  properly  be  coined  into  pieces  of  equal  weight  and  quality 
as  has  heretofore  been  the  practice  among  most  civilized  nations. 

Nor  can  there  be  any  better  contrivance,  than  the  giving  them 
such  an  impression,  as  shall  certify  the  weight  and  quality;  or  than 
the  exclusive  reservation  to  government  of  the  right  of  impressing 
such  certificate,  and,  consequently,  of  coining  money;  for  the  certifi- 
cate of  a  number  of  coiners,  all  working  together  and  in  competition 
one  with  the  other,  could  never  give  an  equal  security. 

Thus  fa/,  then,  and  no  further,  should  the  public  authority  inter- 
meddle with  the  business  of  money. 

The  value  of  a  piece  of  silver  is  arbitrary,  and  is  established  by 
a  kind  of  mutual  accord  on  every  act  of  dealing  between  one  indi- 
vidual and  another,  or  between  the  government  and  an  individual. 
Why,  therefore,  attempt  to  fix  its  value  beforehand  1  since,  after  all, 
the  fixation  must  be  imaginary,  and  can  never  answer  any  practical 
purpose,  in  the  money  transactions  of  mankind.  Why  give  a  deno- 
mination to  this  fixed,  imaginary  value,  which  money  can  never 
possess?  For  what  is  a  dollar,  a  ducat,  a  florin,  a  pound  sterling, 
or  a  franc;  what,  but  a  certain  weight  of  gold  or  silver  of  a  certain 
established  standard  of  quality?  And,  if  this  be  all,  why  give  these 
respective  portions  of  bullion  any  other  name,  than  the  natural  one 
of  their  weight  and  quality'? 

Five  grammes  of  silver,  says  the  law,  shall  be  equivalent  to  a 
franc:  which  is  just  as  much  as  to  say,  5  grammes  of  silver  is 
equivalent  to  5  grammes  of  silver.  For  the  only  idea  presented  to 
the  mind  by  the  word  franc,  is  that  of  the  5  grammes  of  silver  it 
contains.  Do  wheat,  chocolate  or  wax,  change  their  name  by  the 
mere  act  of  apportioning  their  weight?  A  pound  weight  of  bread, 
chocolate,  or  of  wax  candles,  is  still  called  a  pound  weight  of  bread, 
Chocolate,  or  wax  candles.  Why,  then,  should  not  a  piece  of  silver, 
weighing  5  grammes,  go  by  its  natural  appellation?  Why  not  call 
it  simply  5  grammes  of  silver? 

This  slight  alteration,  verbal,  critical,  and  nugatory  as  it  may 
seern,  is  of  immense  practical  consequence.  Were  it  once  admitted, 
ii  would  be  no  longer  possible  to  stipulate  in  nominal  value;  every 
r«irgain  would  be  a  barter  of  one  substantial  commodity  for  another, 


CHAP.  XXI.  ON  PRODUCTION.  257 

tf  a  given  quantity  of  silver  for  a  given  quantity  of  grain,  or  butcher's 
meat,  of  cloth,  &c.  &c.  Whenever  a  contract  for  a  long  prospective 
^eriod  was  entered  into,  its  violation  could  not  escape  detection :  a 
person  taking  an  obligation  to  pay  a  given  quantity  of  fine  silver, 
'•it  a  day  certain,  would  know  precisely  how  much  silver  he  would 
*iave  to  receive  at  the  period  assigned,  provided  his  debtor  continued 
solvent. 

The  whole  monetary  system  would  thenceforth  fall  to  the  ground; 
a  system  replete  with  fraud,  injustice,  and  robbery,  and  moreover  so 
complicated,  as  rarely  to  be  thoroughly  understood,  even  by  those 
who  make  it  their  profession.  It  would  ever  after  be  impossible  to 
effect  an  adulteration  of  the  coin,  except  by  issuing  counterfeit 
money;  or  to  compound  with  creditors,  without  an  open,  avowed 
bankruptcy.  The  coinage  of  money  would  become  a  matter  of 
perfect  simplicity,  a  mere  branch  of  metallurgy. 

The  denominations  of  weight,  in  common  use  before  the  introduc- 
tion into  France  of  the  metrical  system,  that  is  to  say,  the  once,  gros, 
grain,  had  the  advantage  of  conveying  the  notion  of  portions  of 
weight,  that  had  remained  stationary  for  many  ages,  and  were  appli- 
cable to  all  commodities  whatever,  without  distinction :  so  that  the 
once  could  not  be  altered  for  the  precious  metals,  without  altering  it 
at  the  same  time  for  sugar,  honey,  and  all  commodities  sold  by  the 
weight :  but,  in  this  particular,  the  new  metrical  system  is  infinitely 
preferable.  It  is  founded  upon  a  basis  provided  by  nature,  which 
must  remain  invariable  as  long  as  our  world  shall  last  The  gramme 
is  the  weight  of  a  cubic  centimetre  of  water :  the  centimetre  is  the 
hundredth  part  of  a  metre,  and  the  metre  is  ^.u^.uoo  Part  of  the  arc 
formed  by  the  circumference  of  the  earth,  'from  the  pole  to  the 
equator.  The  term  gramme  may  be  changed,  but  no  human  power 
can  change  that  portion  of  weight  actually  designated  by  the  term 
gramme;  and  whoever  shall  contract  to  pay  at  a  future  date  a 
quantity  of  silver,  equal  to  100  grammes  weight,  can  never  pay  a 
less  quantity  of  silver,  without  a  manifest  breach  of  faith,  whatever 
arbitrary  measures  of  power  may  intervene. 

The  power  of  a  government  to  facilitate  the  transactions  of  ex- 
change and  contract,  wherein  the  commodity,  money,  is  employed, 
consists  in  dividing  the  metal  into  different  pieces  of  one  or  more 
grammes  or  centigrammes,  in  such  a  manner,  as  to  admit  of  instant 
calculation  of  the  number  of  grammes  a  given  payment  will  require. 

It  has  been  ascertained  by  the  experiments  of  the  Academy  of 
Sciences,  that  gold  and  silver  resist  friction  better  with  a  slight  mix- 
ture of  alloy,  than  in  a  pure  state.  People  versed  in  these  matters 
say,  besides,  that  this  complete  purity  cannot  be  obtained,  without 
a  very  expensive  chemical  process,  that  would  add  greatly  to  the 
expense  of  coinage.  There  is  no  sort  of  objection  to  mixing  alloy, 
provided  the  proportion  be  signified  by  the  impression,  which  should 
be  nothing  more  than  a  mere  certificate  of  the  weight  and  quality 
of  the  metal. 

I  make  no  mention  of  the  terms  franc,  dccime,  centime,  because 
22  *  2  H 


258  ON  PRODUCTION.  BOOF  L 

those  names  should  never  have  been  given  to  the  coin,  being,  in  fact, 
names  indicative  of  nothing  whatever.  The  laws  of  France,  instead 
of  enacting  that  pieces  called  francs,  shall  be  coined,  having  the 
weight  of  5  grammes  of  silver,  snould  have  simply  ordered  a  coinage 
of  pieces  of  5  grammes.  In  which  case,  a  letter  of  credit  or  bill 
of  exchange,  instead  of  being  drawn  for,  say  400  fr.,  would  be  for 
2000  grammes  of  silver  of  the  standard  of  fV  silver  to  TV  alloy ;  or 
if  preferred,  for  130  grammes  of  gold  of  the  same  degree  of  purity ; 
and  the  payment  would  be  the  most  simple  imaginable ;  for  the  pieces 
of  coin,  gold  and  silver,  would  be  all  fractions  or  multiples  of  the 
gramme  of  metal  of  that  standard. 

However,  it  would  still  be  necessary  to  enact,  that  no  sum  stipu- 
lated in  grammes  of  silver  or  gold  should  be  payable  otherwise  than 
in  coin,  unless  under  a  special  proviso ;  else,  the  debtor  might  dis- 
charge all  claims  in  bullion  of  somewhat  less  value  than  coin.  This 
is  obviously  matter  of  practical  arrangement ;  the  principle  requiring 
nothing,  but  that  the  obligation,  after  mentioning  the  metal  and 
standard,  should  specify  on  the  face  of  it,  whether  payable  in  national 
coin  or  bullion.  The  only  object  of  such  a  law  would  be,  to  save 
the  continual  necessity  of  enumerating  many  particulars  that  would 
thenceforward  be  implied. 

A  government  should  never  coin  the  bullion  of  private  persons, 
without  charging  the  profit,  as  well  as  the  cost,  of  the  operation. 
The  monopoly  of  coinage  will  enable  it  to  make  this  profit  some- 
what high :  but  it  should  be  varied  according  to  the  state  of  metal- 
lurgic  science,  and  the  demand  for  circulation.  Whenever  the  state 
has  little  to  coin  on  its  own  account,  it  had  better  lower  its  charges, 
than  let  its  machinery  and  workmen  remain  idle;  and,  on  the  other 
hand,  raise  its  charges,  when  the  influx  of  bullion  is  rapid  and  super- 
abundant. And  in  this,  it  would  but  imitate  other  manufacturers. 
As  to  the  bullion  bought  and  coined  by  government  on  its  own 
account,  the  coin  issued  would  reimburse  the  charges ;  and  yield  a 
profit  by  its  superior  value  in  exchange ;  as  I  have  endeavoured  to 
prove  above,  in  Section  IV. 

To  the  marks  indicative  of  weight  and  quality,  should  of  course 
be  superadded  every  device  to  prevent  counterfeits. 

I  have  not  occupied  my  reader's  time  with  any  observations  on 
the  relative  proportion  of  gold  to  silver ;  nor  was  there  any  occasion 
to  do  so.  Having  avoided  any  specification  of  their  value  under 
any  particular  denomination,  I  shall  pay  no  more  attention  to  the 
alternating  variations  of  that  value,  than  to  the  fluctuations  of  the 
relative  value  of  both  to  all  other  commodities.  This  must  be  left 
lo  regulate  itself;  for  any  attempt  to  fix  it  wquld  be  vain.  With 
?  egard  to  obligations,  they  would  be  dischargeable  in  the  terms  of 
contract:  an  undertaking  to  pay  100  grammes  of  silver  would  be 
discharged  by  the  transfer  of  100  grammes  of  silver;  unless,  at  the 
time  of  payment,  by  mutual  consent  of  the  contracting  parties,  any 
itther  metal,  or  goods  at  a  rate  agreed  on,  should  be  substituted  in 
preference. 


CHAP.  XXI.  ON  PRODUCTION.  259 

It  would  be  difficult  to  calculate  the  advantage,  that  would  accrue 
to  industry  in  all  its  branches,  from  so  simple  an  arrangement;  but 
some  notion  of  it  may  be  obtained,  by  considering  the  mischiefs  that 
have  resulted  from  a  contrary  system.  Not  only  has  the  relative 
pecuniary  position  of  individuals  been  repeatedly  overset,  and  the 
best  planned  and  most  beneficial  productive  enterprises  altogether 
thwarted  and  rendered  abortive ;  but  the  interests  of  the  public,  as 
well  as  of  private  persons,  are,  almost  everywhere,  subject  to  daily 
and  hourly  aggression. 

A  medium,  composed  sntirely  of  either  silver  or  gold,  bearing  a 
certificate,  pretending  to  none  but  its  real  intrinsic  value,  and,  conse- 
quently exempt  from  the  caprice  of  legislation,  would  hold  out  such 
advantages  to  every  department  of  commerce,  and  to  every  class 
of  society,  that  it  could  not  fail  to  obtain  currency  even  in  foreign 
countries.  Thus,  the  nation,  that  should  issue  it,  would  become  a 
general  manufacturer  of  money  for  foreign  consumption,  and  might 
derive  from  that  branch  of  manufacture  no  inconsiderable  revenue. 
We  read  in  Le  Blanc,*  that  a  particular  coin  issued  by  St.  Louis, 
and  called  agnels  (Par,  from  the  figure  of  a  lamb  impressed  upon 
them,  was  in  great  request  even  among  foreigners,  and  a  favourite 
money  in  commercial  dealings,  for  the  sole  reason  that  it  invariably 
contained  the  same  quantity  of  gold,  from  the  reign  of  St.  Louis  to 
that  of  Charles  VI. 

Should  France  be  so  fortunate  as  to  make  this  experiment,  I  hope 
none  of  those  who  do  me  the  honour  to  read  this  work,  will  feel  any 
regret  at  the  drain  of  its  money,  to  use  the  expression  of  certain 
persons,  who  neither  know  nor  choose  to  learn  any  thing  of  the 
matter.  It  is  quite  clear,  that  neither  silver  nor  gold  coin  will  go 
out  of  the  kingdom,  without  leaving  behind  a  value  fully  equivalent 
to  the  metal  and  the  fashion  it  bears.  The  trade  and  manufacture  of 
jewellery  for  export  are  considered  lucrative  to  the  nation ;  yet  they 
occasion  an  outgoing  of  the  precious  metals.  The  beauty  of  the 
form  and  pattern  adds,  to  be  sure,  greatly  to  the  price  of  the  metal 
thus  exported ;  but  the  accuracy  of  assay  and  weight,  and,  above  all 
things,  the  maintenance  of  the  coin  at  an  invariable  standard  of 
weight  and  quality,  would  be  an  equal  recommendation,  and  would 
undoubtedly  be  just  as  well  paid  for. 

Should  it  be  objected,  that  the  same  system  was  adopted  by 
Charlemagne,  when  he  called  a  pound  of  silver  a  lime,  and  that 
notwithstanding  the  coin  has  been  since  repeatedly  deteriorated, 
until,  at  last,  what  was  called  a  livre,  contained,  in  fact,  but  96  gr., 
I  answer: 

1.  That,  neither  in  the  time  of  Charlemagne,  nor  at  any  subse- 
quent period,  has  there  ever  been  a  coin  containing  a  pound  of 
silver ;  that  the  livre  has  always  been  a  money  of  account,  an  ideal 
measure.  The  silver  coin  of  Charlemagne  and  his  successors,  con 
sisted  of  sols  of  silver,  the  sol  being  a  fractional  part  of  the  poun<< 
weight  _ 

*  Traite  Hist,  des  Monnaies  de  la  France,  Prolegom.  p.  4. 


260  ON  PRODUCTION.  BOOK  L 

2.  None  of  the  coin  has  ever  borne  on  the  face  of  it  the  indication 
of  the  weight  of  metal  it  contained.     There  are  extant  in  the  col- 
lections of  medals  many  pieces  coined  in  the  reign  of  Charlemagne. 
The  impression  was  nothing  more  than  the  name  of  the  monarch, 
with  the  occasional  addition  of  the  name  of  the  town  where  the  coin 
was  struck,  executed  in  very  rude  characters;  which,  indeed,  is  not 
to  be  wondered  at,  considering  that  the  monarch,  though  an  avowed 
patron  of  literature,  was  himself  unable  to  write. 

3.  The  coin  was  yet  further  from  bearing  any  thing  indicative 
of  the  standard  quality  of  the  metal,  and  this  was  the  thing  first 
encroached  upon ;  for  the  sol  in  the  reign  of  Philip  I.  still  contained 
the  same  fractional  weight  of  the  lime  as  originally ;  but  it  was  made 
up  of  8  parts  of  silver  to  4  copper,  instead  of  containing,  as  under 
the  second  race  of  monarchs,  12  oz.  of  fine  silver,  which  was  the 
then  weight  of  the  livre. 

The  very  singular  state  of  the  actual  money  of  England,  and  the 
extraordinary  circumstances,  that  have  occurred  in  respect  to  it 
since  the  first  editions  of  this  work  appeared,  have  given  a  decisive 
proof,  that  the  mere  want  of  an  agent  of  circulation,  or,  of  the  com- 
modity, money,  is  sufficient  to  support  a  paper-money  absolutely 
destitute  of  security  for  its  convertibility  at  a  high  rate  of  value,  or 
even  at  a  par  with  metal,  provided  it  be  limited  in  amount  to  the 
actual  demand  of  circulation.*  Whence  some  English  writers  of 
great  intelligence  in  this  branch  of  science  have  been  led  to  con- 
clude, that,  since  the  purposes  of  money  call  into  action  none  of  the 
physical  and  metallic  properties  of  its  material,  some  substance  less 
costly  than  the  precious  metals,  paper,  for  instance,  may  be  employed 
in  them  with  good  effect,  if  due  attention  be  paid  to  keep  the  amount 
of  the  paper  within  the  demands  of  circulation.  The  celebrated 
Ricardo,  has,  with  this  object,  proposed  an  ingenious  plan,  making 
the  Bank  or  corporate  body,  invested  with  the  privilege  of  issuing 
the  paper-money,  liable  to  pay  in  bullion  for  its  notes  on  demand. 
A  note,  actually  convertible  on  demand  into  so  much  gold  or  silver 
bullion,  cannot  fall  in  value  below  the  value  of  the  bullion  it  purports 
to  represent;  and,  on  the  other  hand,  so  long  as  the  issues  of  the 
paper  do  not  exceed  the  wants  of  circulation,  the  holder  will  have 
no  inducement  to  present  it  for  conversion,  because  the  bullion,  when 
obtained,  would  not  answer  the  purposes  of  circulation.  If  a  casual 
interruption  of  confidence  in  the  paper  should  bring  it  for  conversion 
in  too  large  quantity,  the  paper  remaining  in  circulation  must  rise 
in  value,  in  the  absence  of  any  other  circulating  medium,  and  there 
would  be  an  inducement  to  bring  bullion  to  the  bank  to  be  converted 
into  paper,  f 

*  Vide  our  author's  pamphlet,  entitled,  de  V  Angleterre,  et  des  Anglais,  1815. 
3d  edition,  p.  50,  et  seq. 

\  Proposals  for  an  economical  and  secure  Currency,  by  D.  Ricardo,  1816.  It 
seems,  the  British  legislature  has  since  adopted  the  expedient  of  that  writer,  in 
.S19  The  experiment  is  yet  in  progress;  and  whatever  be  its  ultimate  result, 
'•.  must  needs  advance  the  interests  of  the  science. 


CHAP.  XXI.  ON  PRODUCTION.  261 

SECTION  X. 
Of  a  Copper  and  Base  Metal?  Coinage. 

The  copper  coin  and  that  of  base  metal,  are  not,  strictly  speaking, 
money ;  for  debts  cannot  be  legally  tendered  in  this  coin,  except  such 
fractional  sums,  as  are  too  minute  to  be  paid  in  gold  or  silver.  Gold 
and  silver  are  the  only  metal-money  of  almost  all  commercial  nations. 
Copper  coin  is  a  kind  of  transferable  security,  a  sign  or  representa- 
tive of  a  quantity  of  silver  too  diminutive  to  be  worth  the  coinage ; 
and,  as  such,  the  government,  that  issues  it,  should  always  exchange 
it  on  demand  for  silver,  when  tendered  to  an  amount  equal  to  the 
smallest  piece  of  silver  coin.  Otherwise,  there  is  no  security  against 
the  issue  of  an  excess  beyond  the  demand  of  circulation. 

Whenever  there  is  such  an  excess,  the  holders,  finding  the  base 
metal  less  advantageous  than  the  gold  and  silver  it  represents  but 
does  not  equal  in  value,  would  strive  to  get  rid  of  it  in  every  way; 
whether  by  selling  to  a  loss,  or  by  employing  it  in  preference  to  pay 
for  low-priced  articles,  which  would  consequently  rise  in  nominal 
price ;  or  by  proffering  it  to  their  creditors  in  larger  quantity,  than 
enough  to  make  up  the  fractional  part  of  sums  in  account.  The 
government,  having  an  interest  in  preventing  its  being  at  a  discount, 
because  that  would  reduce  the  profit  upon  all  future  issues,  generally 
authorizes  the  latter  expedient. 

Before  1808,  for  instance,  it  was  a  legal  tender  at 'Paris  to  the 
extent  of  *V  of  every  sum  due;  which  had  exactly  the  same  effect, 
as  a  partial  debasement  of  the  national  currency.  Every  body  knew, 
when  a  bargain  was  concluded,  that  he  was  liable  to  be  paid  in  pro- 
portion of  *V  copper  or  brass  metal,  to  ££  silver,  and  made  his  cal- 
culation accordingly,  on  terms  proportionably  higher,  than  if  no  such 
regulation  had  existed.  It  is  with  this  particular,  precisely  as  wiJi 
the  weight  and  standard  of  the  silver  coin ;  sellers  do  not  stop  to 
weigh  and  assay  every  piece  they  receive,  but  the  dealers  in  gold 
and  silver,  and  those  connected  with  the  trade,  are  perpetually  on 
the  watch  to  compare  the  intrinsic,  with  the  current,  value  of  the 
coin ;  and,  whenever  their  values  differ,  they  have  an  opportunity  of 
gain ;  their  operations  to  obtain  which,  have  a  constant  tendency  to 
put  the  current  value  of  the  coin  on  a  level  with  its  real  value. 

The  obligation  to  receive  copper  in  any  considerable  proportion, 
has,  in  like  manner,  an  influence  upon  the  exchange  with  foreigners. 
There  is  no  question,  that  a  letter  of  exchange  on  Paris  payable  in 
francs  is  sold  cheaper  at  Amsterdam,  in  consequence  of  the  liability 
to  receive  part  payment  in  copper  or  base  metal ;  just  as  it  would 

*  Billon,  a  compound  of  copper  and  silver,  containing  J  or  \  only  of  the  latter 
and  the  residue  of  the  former.  It  is  used  in  the  fractional  coinage  of  France,  to 
supersede  the  employment  of  copper  in  large  quantities. 


ON  PRODUCTION.  BOOK  I. 

oe,  if  the  franc  were  made  to  contain  less  of  silver  and  more  of 
alloy. 

Yet,  it  is  to  be  observed,  that,  on  the  whole,  the  value  of  money 
is  not  so  much  affected  by  this  circumstance,  as  by  the  mixture  of 
alloy;  for  the  alloy  has  positively  no  value  whatever,  for  the  reasons 
above  stated  ;*  whereas,  the  copper  money,  payable  in  the  ratio  of 
*V,  had  a  small  intrinsic  value,  though  inferior  to  the  sum  in  silver, 
it  was  made  to  pass  for :  had  it  been  of  equal  value,  there  would  have 
been  no  occasion  for  an  express  law  to  give  it  currency. 

As  long  as  a  government  gives  silver  on  demand  for  the  copper 
and  base  "metal  regularly  presented,  it  can  with  little  inconvenience 
give  them  very  trifling  intrinsic  value ;  the  demand  for  circulation 
will  always  absorb  a  very  large  quantity,  and  they  will  maintain 
their  value  as  fully,  as  if  really  worth  the  fractional  silver  represented ; 
on  exactly  the  same  principle,  as  a  bank-note  passes  current,  and  that 
too  for  years  together,  without  any  intrinsic  value,  just  as  well  as  if 
really  worth  the  sum  it  purports  on  the  face  of  it  to  contain.  In  this 
manner,  such  a  coinage  can  be  made  more  profitable  to  the  govern- 
ment than  by  any  compulsion  to  receive  it  in  part  payment;  and  the 
value  of  the  legal  coin  will  suffer  no  depreciation.  The  only  danger 
is  that  of  counterfeits,  which  there  is  the  strongest  stimulus  for  ava- 
rice to  fabricate,  in  proportion  as  the  difference  between  the  intrinsic, 
and  the  current  value,  grows  wider. 

The  last  King  of  Sardinia's  predecessor,  in  attempting  to  with- 
draw from  circulation  a  base  currency,  issued  by  his  father  in  a 
period  of  calamity,  had  more  than  thrice  the  quantity  originally 
issued  by  the  government  thrown  upon  his  hands.  The  same  thing 
happened  to  the  king  of  Prussia,  when,  under  the  assumed  name  of 
the  Jew  Ephraim,  he  withdrew  the  base  coin  he  had  compelled  the 
Saxons  to  receive,  during  his  distresses  in  the  seven  years'  war  ;f 
and  for  exactly  the  same  reason.  Counterfeits  of  the  coin  are  usually 
executed  beyond  the  national  frontier.  In  England  it  was  attempted 
to  remedy  this  evil  in  the  year  1799,  by  a  coinage  of  half-pence 
with  a  very  fine  impression,  and  executed  with  an  attention  and 
perfection,  that  counterfeiters  can  rarely  bestow. 


SECTION  XI. 

, 

Of  the  preferable  Form  of  Coined  Money. 

The  wear  of  the  coin  by  friction  is  proportionate  to  the  extent  of 
its  surface.  Of  two  pieces  of  coin  of  equal  weight  and  quality,  that 
will  suffer  least  from  continual  use,  which  offers  the  least  surface  to 
Jie  friction. 

The  spherical  or  globular  form  is,  consequently,  preferable  in  this 

*  Supra,  p.  166. 

f  Mongez,  Consider,  sur  les  Monnaies,  p.  31. 


CHAP.  XXL  ON  PRODUCTION.  263 

respect,  as  least  liable  to  wear ;  but  it  has  been  rejected  on  account 
of  its  inconvenience. 

Next  to  this  form,  the  cylinder,  of  equal  depth  and  breadth,  is 
that,  which  exposes  the  smallest  surface ;  but  this  is  fully  as  incon- 
venient as  the  other ;  the  form  of  a  very  flat  cylinder  has,  conse- 
quently, been  very  generally  adopted.  However,  from  what  has 
been  already  said,  it  will  appear,  that  the  less  it  is  flattened  the  bet- 
ter ;  and  that  the  coin  should  rather  be  made  thick  than  broad. 

With  regard  to  the  impression,  the  chief  requisites  are,  1.  That  it 
specify  the  weight  and  quality  of  the  piece ;  2.  That  it  be  very  dis- 
tinct, and  intelligible  to  the  meanest  capacity;  3.  That  the  die  oppose 
all  possible  difficulties  to  the  defacing  or  reducing  of  the  coin ;  that 
is  to  say,  that  it  be  so  contrived,  that  neither  the  ordinary  wear  nor 
fraudulent  practices  should  be  able  to  reduce  the  weight  without 
destroying  the  impression.  The  last  coined  English  half-pence  have 
a  cord,  not  projecting,  but  indented  in  the  thickness  of  the  circum- 
ference, and  occupying  the  central  part  of  the  circumference  only, 
so  as  to  make  it  liable  neither  to  clipping  nor  wear.  This  mode 
might  be  adopted  in  the  silver  and  gold  coinage  with  certainty  and 
success ;  and  it  is  of  much  more  consequence  to  prevent  their  dete- 
rioration. 

When  the  impression  is  in  basso  relievo,  it  should  project  but 
little,  for  the  convenience  of  piling  the  pieces  one  upon  another,  as 
well  as  to  reduce  the  friction.  On  the  same  account  a  projecting 
impression  should  not  be  too  sharp  on  the  surface,  or  it  would  wear 
away  too  rapidly.  With  a  view  to  prevent  this,  experiments  have 
been  made  of  dies  executed  in  alto  relievo ;  but  it  was  found  that 
the  coin  was  thereby  too  much  weakened,  and  liable  to  be  bent  or 
broken.  This  plan,  however,  might  possibly  be  practised  with  advan- 
tage, if  the  pieces  were  secured  by  greater  thickness. 

The  same  motive  of  giving  to  the  coin  the  least  possible  surface, 
should  induce  the  government  to  issue  as  large  pieces  as  convenience 
will  admit;  for  the  more  pieces  there  are,  the  greater  is  the  surface 
exposed  to  friction.  No  more  small  pieces  of  coin  should  be  issued, 
than  just  enough  to  transact  exchanges  of  small  amount,  and  to  pay 
fractional  sums.  All  large  sums  should  be  paid  in  large  pieces 
of  coin. 


SECTION  XIL 
Of  the  Party,  on  whom  the  Loss  of  the  Coin  by  Wear  should  properly  fall 

It  has  been  a  question,  who  ought  to  defray  the  loss,  consequent 
upon  the  friction  or  wear  of  the  coin  ?  In  strict  justice,  the  person 
who  had  made  use  of  it,  in  like  manner  as  the  wearer  of  any  other 
commodity.  A  man,  that  re-sells  a  coat  after  having  worn  it,  sells 
jt  for  less  than  he  gave  for  it  when  new.  So  a  man,  that  sells  a 


264  ON  PRODUCTION.  BOOK  I. 

crown-piece  for  some  other  commodity,  should  sell  it  for  less  than 
he  gave ;  that  is  to  say,  should  receive  a  smaller  quantity  of  goods 
lhan  he  obtained  it  with. 

But  the  portion  of  a  specific  coin,  consumed  in  its  passage  through 
the  hands  of  any  one  honest  person,  is  less  than  almost  any  assigna- 
ble value.  It  may  circulate  for  many  years  together,  without  any 
sensible  diminution  of  its  weight ;  and,  when  the  diminution  is  dis- 
covered, it  may  be  impossible  to  tell,  by  which  of  the  innumerable 
holders  it  was  effected.  I  am  aware,  that  each  of  them  has  imper- 
ceptibly shared  the  depreciation  of  its  exchangeable  value,  occasion- 
ed by  the  wear ;  that  the  quantity  of  goods  it  would  purchase  has 
declined  bv  an  insensible  gradation ;  that,  although  the  depreciation 
has  been  imperceptibly  progressive,  it  becomes  at  last  very  manifest; 
and  that  worn  money  will  not  be  taken  at  par  with  new  coin.  Con- 
sequently, I  think,  that,  if  an  entire  class  of  coin  were  gradually  so 
reduced  as  to  make  a  re-coinage  necessary,  its  holders  could  not  in 
reason  expect  that  their  reduced  coin  should  be  exchanged  for  new 
at  par,  pioce  for  piece.  Their  money  should  be  received,  even  by 
the  government,  at  no  more  than  its  real  value;  the  silver  it  contains 
is  less  in  quantity  than  at  the  first  issue ;  and  it  has  been  received  by 
the  holders  at  a  lower  rate  of  value ;  they  have  given  for  it  less  goods 
than  they  would  have  done  in  the  outset. 

In  fact  this  is  the  course  that  rigid  justice  w'  jld  prescribe ;  but 
there  are  two  reasons,  why  it  should  not  be  strictly  enforced. 

1.  Each  individual  piece  of  coin  is  not,  if  I  may  be  allowed  the 
expression,  a  substantive  article  of  commerce.     Its  exchangeable 
value  is  calculated,  not  according  to  the  weight  and  quality  of  the 
identical  piece  in  question,  but  according  to  the  average  weight  and 
quality  of  the  coin  in*  large  quantities,  as  ascertained  by  common 
experience.     A  crown  piece  of  an  earlier  date,  and  more  worn,  is 
yet  freely  received  in  exchange  for  one  more  new  and  perfect ;  the 
difference  is  sunk  in  the  average.  The  mint  issues  new  pieces  every 
year  of  the  full  weight  and  standard,  which  prevents  the  coin  from 
declining  sensibly  in  value,  in  consequence  of  the  friction,  even  for 
many  years  after  its  issue. 

This  circumstance  is  illustrated  by  the  fact,  of  the  French  pieces 
of  12  and  24  sous  passing  current  at  par  with  the  crown-pieces  of  6 
livres  without  any  difficulty ;  although  the  same  nominal  sum,  in  the 
shape  of  the  worn  pieces  of  12  and  24s.,  contained  in  reality  about 
^  less  silver  than  the  crown-piece. 

The  subsequent  law,  which  prohibited  their  being  taken  by  the 
public  receivers  or  private  persons  at  more  than  10  and  20  sous, 
rated  them  at  their  full  intrinsic  value,  but  below  the  rate,  at  which 
the  then  holders  had  taken  them.  For  their  value  had  been  previously 
kept  up  to  12  and  24  sous  in  spite  of  the  wear,  by  reason  of  iheii 
passing  current  at  par  with  the  crown-piece.  Thus,  the  last  holder 
was  saddled  with  the  entire  loss  of  a  friction,  to  which  the  innumer- 
able hands  they  had  passed  through  had  all  contributed. 

2.  The  impression  is  equally  effectual  in  giving  currency  at  the 


CHAP.  XXII.  ON  PRODUCTION.  265 

last  as  at  the  first,  although  it  becomes  in  course  of  time  scarcely, 
if  at  all  visible ;  witness  the  shillings  of  England.  The  coin  derives, 
as  above  explained,  a  certain  degree  of  value  from  the  mere  impres- 
sion, .which  value  has  been  admitted  and  recognised  throughout, 
until  it  reaches  the  ultimate  holder,  who  has  in  consequence  received 
it  at  a  higher  rate,  than  he  would  a  piece  of  blank  bullion  of  equal 
weight.  To  saddle  him  with  the  difference,  would  be  to  make  him 
lose  the  whole  value  of  the  impression,  although  it  has  been  equally 
serviceable  to  perhaps  a  million  of  others. 

On  these  grounds,  I  am  inclined  to  think,  the  loss  by  wear,  and 
that  of  the  Impression,  should  be  borne  by  the  community  at  large ; 
that  is  to  say,  by  the  public  purse :  for  the  whole  society  derives  the 
benefit  of  the  money ;  and  it  is  impossible  to  tax  each  individual,  in 
the  precise  proportion  of  the  use  he  has  made  of  it. 

To  conclude :  every  individual,  that  carries  bullion  to  the  mint  to 
be  coined  may  be  fairly  charged  the  expenses  of  the  process,  and, 
if  thought  advisable,  the  full  monopoly-profit.  Thus  far  there  is  no 
harm  done :  his  bullion  is  increased  in  value  to  the  full  amount  of 
what  he  has  been  charged  by  the  mint ;  otherwise,  he  would  never 
have  carried  it  thither.  At  the  same  time,  I  am  of  opinion,  that  the 
mint  should  always  give  a  new  piece  in  exchange  for  an  old  one  on 
demand :  which  need  nowise  interfere  with  the  utmost  possible  pre- 
cautions against  the  clipping  and  debasing  of  the  coin.  The  mint 
should  refuse  such  pieces  as  have  lost  certain  parts  of  the  impression, 
which  are  not  liable  to  fair  and  unavoidable  wear ;  and  the  loss  in 
that  case  should  fall  on  the  individual,  careless  enough  to  take  a  piece 
thus  palpably  deficient  The  promptitude,  with  which  the  public 
would  take  care  to  carry  injured  or  suspicious  pieces  to  the  mint, 
would  greatly  facilitate  the  detection  of  fraudulent  practices. 

With  diligence  on  the  part  of  the  executive,  the  loss  arising  from 
this  source  might  be  reduced  to  a  mere  trifle,  and  the  system  of  na- 
tional money  would  be  materially  improved,  as  well  as  the  foreign 
exchange. 


CHAPTER  XXIL 

OF  SIGNS  OR  REPRESENTATIVES  OF  MONEY. 

SECTION  I. 

I 

Of  Bills  of  Exchange  and  Letters  of  Credit. 

A  BILL  of  exchange,  a  promissory  note  or  check,  and  a  ieiter  ol 
credit,  are  written  obligations  to  pay,  or  cause  to  be  paid,  a  sum  of 
money,  either  at  a  future  time,  or  at  a  different  place. 
23  21 


266  ON  PRODUCTION.  BOOK  I. 

The  right  conveyed  by  the  assignment  of  these  engagements, 
though  not  capable  of  being  enforced  immediately,  or  elsewhere 
than  at  the  stipulated  place,  yet  gives  them  an  actual  value,  greater 
or  less,  according  to  circumstances.  Thus  a  bill  of  exchange  for  100 
dollars,  payable  at  Paris  at  two  months'  date,  may  be  negotiated  or 
sold,  at  pleasure,  at  the  rate  of,  say  99  dollars,  while  a  letter  of  credit 
of  like  amount,  payable  at  Marseilles  in  the  same  space  of  time,  will, 
perhaps,  be  worth  at  Paris  but  98  dollars. 

These  engagements  may  be  used  as  money  in  all  transactions  of 
purchase,  as  soon  as  they  are  invested  with  actual  present  value, 
by  the  prospect  of  their  future  value ;  indeed,  most  of  the  greater 
operations  of  commerce  are  effected  through  the  medium  of  these 
securities. 

Sometimes,  the  circumstance  of  a  bill  of  exchange  being  payable 
at  another  place  will  increase,  instead  of  diminishing  its  value ;  but 
this  depends  upon  the  state  of  commerce  for  the  time  being.  If  the 
merchants  of  Paris  have  large  payments  to  make  to  those  of  London, 
they  will  readily  give  more  money  at  Paris  for  a  bill  upon  London, 
than  it  will  produce  to  the  holder  at  the  latter  place.  Thus,  although 
the  pound  sterling  contain  precisely  as  much  silver  as  24  fr.  74 
cents,  they  will,  perhaps,  give  at  Paris  25  fr.,  more  or  less,  for  every 
pound  sterling  payable  in  London.* 

This  is  what  is  called  the  course  of  exchange,  being,  in  fact,  a 
mere  specification  of  the  quantity  of  precious  metal  people  will  con- 
sent to  give,  for  the  transfer  of  a  right  to  receive  a  given  quantity 
of  the  same  metal  at  any  other  specified  place.  The  particular 
locality  of  the  metal  reduces  or  increases  its  value,  in  relation  to  the 
same  metal  situated  elsewhere. 

The  exchange  is  said  to  be  in  favour  of  any  country,  France,  for 
example,  whenever  less  of  the  precious  metal  is  there  given  for,  than 
will  be  produced  by,  a  bill  of  exchange  upon  another  country ;  or 
whenever  in  the  foreign  country  more  of  the  precious  metal  is  given 
for  a  bill  of  exchange  on  France,  than  it  will  there  produce  to  the 
holder.  The  difference  is  never  very  considerable,  and  cannot  ex- 
ceed the  charge  of  transporting  the  precious  metal  itself;  for,  if  a 
foreigner,  who  wants  to  make  a  payment  at  Paris,  can  remit  the  sum 
in  specie  at  less  expense  .than  he  could  be  put  to  by  the  existing 
course  of  exchange,  he  would  undoubtedly  remit  in  specie.f 

It  has  been  imagined  by  some  people,  that  all  debts  to  foreigners 
can  be  paid  by  bills  of  exchange;  and  measures  have  been  frequently 
suggested,  and  sometimes  adopted,  for  the  encouragement  of  this 
fictitious  mode  of  payment.  But  this  is  a  mere  delusion.  A  bill 
of  exchange  has  no  intrinsic  value;  it  can  only  be  drawn  upon  any 

*  If  the  credit  on  London  be  payable  in  paper-money  instead  of  specie,  the 
course  of  exchange  with  Paris  of  the  pound  sterling1,  may,  perhaps,  fall  to  21 /r., 
18/r.,  or  even  less,  in  proportion  to  the  discredit  of  the  paper  of  England. 

•j-  In  that  expense  I  include  the  charge  and  risk  of  transport  and  of  smuggling 
also,  if  the  export  of  specie  be  prohibited;  which  latter  is  proportionate  to  the 
difficulty  of  the  operation.  The  risks  are  estimated  in  the  rate  -.f  insurance. 


CHAP.  XXIL  ON  PRODUCTION.  267 

place  for  a  sum  actually  due  at  that  place ;  and  no  sum  can  be  there 
actually  due,  unless  an  equal  value,  in  some  shape  or  other,  has  been 
remitted  thither :  the  imports  of  a  nation  can  only  be  paid  by  the 
national  export;  and  vice  versa.  Bills  of  exchange  are  a  mere 
representative  of  sums  due ;  in  other  words,  the  merchants  of  one 
country  can  draw  bills  on  those  of  another  for  no  more,  than  the 
full  amount  of  the  goods  of  every  description,  silver  and  gold  in- 
cluded, which  they  may  have  sent  thither  directly  or  indirectly.  If 
one  country,  say  France,  have  remitted  to  another  country,  Ger- 
many perhaps,  merchandise  to  the  value  of  2  millions  of  dollars,  and 
the  latter  have  remitted  to  the  former  to  the  amount  of  3  millions 
of  dollars,  France  can  pay  as  much  as  2  millions  by  the  means  of 
bills  of  exchange,  representing  the  value  of  her  export ;  but  the 
remaining  1  million  cannot  be  so  discharged  directly,  although  pos- 
sibly they  may  by  bills  of  exchange  upon  a  third  country,  Italy,  for 
instance,  whither  she  may  have  exported  goods  to  that  extent. 

There  is,  indeed,  a  species  of  bills,  called  by  commercial  men, 
accommodation-paper,  which  actually  represents  no  value  whatever. 
A  merchant  at  Paris,  in  league  with  another  of  Hamburgh,  draws 
bills  upon  his  correspondent,  which  the  latter  pays  or  provides  for, 
by  re-drawing  and  negotiating  or  selling  bills  at  Hamburgh  upon 
his  correspondent  at  Paris.  So  long  as  these  bills  are  in  possession 
of  any  third  person,  that  third  person  has  advanced  their  value. 
The  negotiation  of  such  accommodation-paper  is  an  expedient  for 
borrowing,  and  a  very  expensive  one ;  for  it  entails  the  loss  of  the 
banker's  commission,  brokerage  and  other  incidental  charges,  over 
and  above  the  discount  for  the  time  the  bills  have  to  run.  Paper  of 
this  description  can  never  wipe  out  the  debt,  that  one  nation  owes 
another;  for  the  bills  drawn  on  one  side  balance  and  extinguish  those 
on  the  other.  The  Hamburgh  bills  will  naturally  counterpoise  those 
of  Paris,  being  in  fact  drawn  to  meet  them;  the  second  set  destroys 
the  first,  and  the  result  is  absolute  nullity. 

Thus  it  is  evident,  that  one  nation  cafnnot  otherwise  discharge  its 
debts  to  another,  than  by  remittance  of  actual  value  in  goods  or 
commodities,  in  which  term  I  comprise  the  precious  metals,  amongst 
others,  to  the  full  amount  of  what  it  has  received  or  owes.  If  the 
actual  values  directly  remitted  thither  are  insufficient  to  balance  the 
receipts  or  imports  thence,  it  may  remit  to  a  third  nation,  and  thence 
transport  produce  enough  to  make  up  the  deficit.  How  does  France 
pay  Russia  for  the  hemp  and  timber  for  ship-building  imported 
thence?  By  remittance  of  wines,  brandies,  silks,  not  merely  to 
Russia,  but,  likewise  to  Hamburgh  and  Amsterdam,  whence  again  a 
remittance  of  colonial  and  other  commercial  produce  is  forwarded 
to  Russia. 

Governments  have  commonly  made  it  their  object  to  contrive 
that  the  precious  metals  shall  form  the  largest  possible  portion  of 
the  national  import  from,  and  the  least  possible  portion  of  the  na- 
tional export  to,  foreign  countries.  I  have  already  taken  occasion 
to  remark,  with  regard  to  what  is  improperly  called  the  balance  of 


268  ON  PRODUCTION.  BOOK  I. 

trade,  that,  if  the  national  merchant  finds  the  precious  metals  a  more 
profitable  foreign  remittance  than  another  commodity,  it  is  likewise 
the  interest  of  the  state  to  remit  in  that  form ;  for  the  state  can  only 
gain  and  lose  in  the  persons  of  its  individual  subjects;  and,  in  the 
matter  of  foreign  commerce,  whatever  is  best  for  the  individuals  in 
the  aggregate,  is  best  for  the  state  also.*  Thus,  when  impediments 
are  thrown  in  the  way  of  the  export  of  the  precious  metals  by  in- 
dividuals, the  effect  is  to  compel  an  export  in  some  other  shape,  less 
advantageous  to#the  individual  and  the  public  too. 


SECTION  II. 
Of  Banks  of  Deposit. 

The  constant  intercourse  between  a  small  state  and  its  neighbours 
occasions  a  perpetual  influx  of  foreign  coin.  For,  although  the  small 
state  may  have  a  national  coinage  of  its  own,  yet,  the  frequent  neces- 
sity of  taking  the  foreign  instead  of  the  national  coin  in  payment, 
requires  the  fixation  of  the  ratio  of  their  relative  value,  in  the  current 
transactions  of  business. 

There  are  many  mischiefs  attending  the  use  of  foreign  coin,  aris- 
ing chiefly  from  the  great  variation  of  weight  and  quality.  It  is 
often  extremely  old,  worn,  and  defaced  ,*  not  having  participated  in 
the  general  re-coinage  of  the  nation  that  issued  it,  where,  perhaps, 
it  is  no  longer  current ;  all  which  circumstances,  though  considered 
in  settling  its  current  relative  value  to  the  local  coin,  yet,  do  not  quite 
reduce  it  ^to  the  natural  level  of  depreciation. 

Bills  drawn  from  abroad  upon  such  a  state,  being  payable  in  the 
coin  thus  rendered  current,  are,  in  consequence,  negotiated  abroad 
at  some  loss;  and  those  drawn  upon  foreign  countries,  and,  conse- 
quently, payable  in  coin  of  a  more  steady  and  intelligible  value,  are 
negotiated  in  a  smaller  state  at  a  premium,  because  the  holder  of 
them  must  have  purchased  them  in  a  depreciated  currency.  In 
short,  the  foreign  coin  is  always  exchanged  for  the  local  currency 
to  a  loss. 

The  remedy  devised  by  states  of  this  inferior  class  is  the  subject 
of  the  present  section.  They  established  banks,f  where  private 
merchants  could  lodge  any  amount  of  local  national  coin,  of  bullion, 
or  of  foreign  coin,  reckoned  by  the  bank  as  bullion;  and  the  amount, 

*  This  position  applies  to  foreign  commerce  only ;  the  monopoly-profits  of 
individuals  in  the  home-market  are  not  entirely  national  gains.  In  internal  deal- 
ings, the  sum  of  the  utility  obtained  is  all  that  is  acquired  by  the  community. 

f  Venice,  Genoa,  Amsterdam,  and  Hamburgh  had  each  an  establishment  of 
this  nature.  All  have  been  swept  away  by  the  torrent  of  the  revolutionary  war; 
but  there  may  be  some  use  in  examining  the  nature  of  institutions  that  may 
Borne  day  or  other  be  re-established.  Besides,  the  investigation  will  throw  light 
upon  the  history  of  the  communities  that  established  them,  and  of  commerce  in 
general.  At  any  rate,  it  was  necessary  to  enumerate  all  the  various  expedients 
that  have  been  resorted  to  as  substitutes  for  money. 


CHAP.  XXIL  ON  PRODUCTION.  261) 

so  lodged,  was  entered  as  so  much  money  of  the  legal  national 
standard  of  weight  and  quality.  At  the  same  time,  the  bank  opened 
an  account  with  each  merchant  making  such  deposit,  giving  him 
credit  for  the  amount  of  the  deposit.  Whenever  a  merchant  wanted 
to  make  a  payment,  there  was  no  occasion  to  touch  the  deposit  at 
all ;  it  was  sufficient  to  transfer  the  sum  required,  from  the  credit  of 
the  party  paying,  to  that  of  the  party  receiving.  Thus  values  could 
be  transferred  continually  by  a  mere  transfer  in  the  books  of  the 
bank.  The  whole  operation  was  conducted  without  any  actual 
transfer  of  specie ;  the  original  deposit,  which  was  entered  at  the  real 
intrinsic  value  at  the  time  of  making  it,  remained  as  security  for  the 
credit  transferred  from  one  person  to  another;  and  the  specie,  so 
lodged  with  the  bank,  was  exempt  from  any  reduction  of  value  by 
wear,  fraud,  or  even  legislative  enactment. 

The  money  still  remaining  in  circulation,  wherever  it  was  ex- 
changed for  the  bank  deposits,  that  is  to  say,  for  entries  in  the  bank 
books,  necessarily  lost  in  proportion  to  the  reduction  of  its  intrin- 
sic value.  And  this  loss  occasioned  the  difference  of  value,  or 
agio  at  Amsterdam,  between  bank  money  and  circulating  money, 
which  was  on  the  average  from  3  to  4  per  cent,  in  favour  of  the 
former. 

It  will  easily  be  imagined,  that  the  bills  of  exchange,  payable  in  a 
currency  so  little  liable  to  injury  or  fluctuation,  must  be  negotiable 
on  better  than  ordinary  terms.  In  fact,  it  was  observable,  that  on 
the  whole,  the  course  of  exchange  was  rather  in  favour  of  the  coun- 
tries that  paid  in  bank,  and  unfavourable  to  those  that  paid  in  circu- 
lating money  only. 

The  bank  retained  the  deposities  in  perpetuity ;  for  the  re-issue 
would  have  been  attended  with  serious  loss ;  inasmuch  as  it  would 
have  been  the  same  thing,  as  producing  good  money  of  the  full 
original  value,  to  be  taken  at  par  with  the  deteriorated  circulating 
coin,  which  passes  current  for — not  its  intrinsic,  but  its  average 
weight.  The  coin  withdrawn  from  the  bank  would  have  been 
mixed  up  with  the  mass  of  circulation,  and  passed  current  at  par 
with  the  rest.  So  that  the  withdrawing  such  deposits  would  have 
been  a  gratuitous  sacrifice  of  the  excess  of  value  of  bank  above  cir- 
culating money. 

This  is  the  nature  of  banks  of  deposit ;  most  of  which  combined 
other  operations  with  the  primary  object  of  their  institution ;  but  of 
them  I  shall  speak  elsewhere.  They  derived  their  profits,  partly 
from  a  duty  levied  upon  every  transfer,  and  partly  from  operations 
incident  to,  and  compatible  with,  their  institution  ;  as,  for  example, 
advances  made  upon  a  deposit  of  bullion. 

It  is  evident,  that  the  inviolability  of  the  deposit,  confided  to 
them,  is  essential  to  the  success  of  such  establishments.  At  Amster- 
dam, the  four  burgomasters,  or  municipal  magistrates,  were  trus- 
tees for  the  creditors.  Annually,  on  leaving  office,  they  handed 
over  the  trust  to  their  successors,  who,  after  inspecting  the  account, 
and  verifying  it  bv  the  registers  of  the  bank,  bound  themselves  hv 
23* 


270  ON  PRODUCTION.  BOOK  I. 

oath,  to  surrender  their  charge  inviolate  to  their  successors  in  office. 
This  trust  was  scrupulously  executed  from  the  first  establishment  of 
the  bank  in  1609  until  1672,  when  the  forces  of  Louis  XIV.  pene- 
trated as  far  as  Utrecht  The  deposits  were  then  faithfully  restored 
to  the  individuals.  It  would  seem  to  have  been  afterwards  less 
scrupulously  managed ;  for,  when  the  French  took  possession  of  that 
capital,  in  1794,  and  called  for  a  statement  of  the  concern,  it  was 
found  to  be  in  advance  of  no  less  a  sum  than  10,624,793  florins  to 
the  India  company,  and  to  the  provinces  of  Holland  and  West- 
Friezeland,  which  were  wholly  unable  to  repay  it.  In  a  country 
governed  by  a  power  without  control  or  responsibility,  it  may  be 
expected,  that  such  a  deposit  would  have  been  still  more  exposed  to 
violation,  (a) 


SECTION  III. 

Of  Banks  of  Circulation  or  Discount,  and  of  Bank-notes,  or 
Convertible  Paper. 

There  is  another  kind  of  bank,  founded  on  totally  different  prin- 
ciples; consisting  of  associated  capitalists,  subscribing  a  capital  in 
transferable  shares,  to  be  employed  in  various  profitable  ways,  but 
chiefly  in  the  discount  of  promissory  notes  and  bills  of  exchange, 
that  is  to  say,  the  advance  of  the  value  of  commercial  paper  not  yet 
due,  with  the  deduction  of  interest  for  the  time  it  has  to  run,  which 
is  called,  the  discount 

These  companies,  with  a  view  to  enlarge  their  capital  and  extend 
their  business,  commonly  issue  notes,  purporting  to  bear  a  promise 
to  pay  to  the  bearer  on  demand,  the  gold  or  silver  specified  on  the 
face  of  them.  Their  security  for  the  due  discharge  of  these  engage- 
ments is,  the  commercial  paper  held  by  the  bank,  and  subscribed 
by  individuals  in  solvent  circumstances ;  for  the  company  gives  its 
notes  in  discount,  or,  what  is  the  same  thing,  in  purchase  of  this 
paper. 

The  private  commercial  paper,  indeed,  having  a  term  to  run 
before  it  falls  due,  can  not  be  available  in  discharge  of  notes  payable 
on  demand ;  for  which  reason,  every  well-conducted  bank  of  circu- 
lation confines  its  advances  of  cash,  or  notes  payable  in  cash  on 

(a)  Public  banks  of  deposit  are  now  quite  obsolete,  and  will  probably  never  be 
revived.  In  fact  they  are  clumsy  expedients,  suited  only  to  the  early  stages  of 
commercial  prosperity,  and  are  liable  to  many  inconveniences.  They  hold  ou» 
a  strong  temptation  to  internal  fraud  and  violence,  as  well  as  to  external  rapaci 
ty;  they  withdraw  from  active  utility  a  large  portion  of  the  precious  metals, 
which  might  perhaps  be  turned  to  better  account  elsewhere  ;  and  they  yield  a 
•legree  of  facility  of  circulation  nowise  superior  to  what  may  be  afforded  by  the 
common  process  of  banking,  except  perhaps  in  security,  and  infinitely  more  ex- 
pensive to  the  public  and  to  individuals.  They  have  accordingly  been  every- 
where supplanted  by  banks  of  circulation,  or  by  the  expedient  of  an  inconvertible 
paper-money.  T. 


CHAP.  XXIL  ON  PRODUCTION.  27L 

demand,  to  the  discount  of  bills  at  very  short  dates,  and  is  careful 
to  have  always  in  hand  a  considerable  amount  of  specie,  probably  a 
third,  or  as  much  as  the  half  of  the  total  amount  of  their  circulating 
notes ;  and,  even  with  all  possible  caution,  it  is  at  times  greatly 
embarrassed,  whenever  a  want  of  confidence  in  its  solvency,  or  any 
untoward  event,  causes  a  sudden  run  upon  the  bank  for  cash.  The 
bank  of  England  has  been  obliged,  on  an  occasion  of  this  kind,  to 
scrape  together  as  many  sixpences  as  it  possibly  could  find,  to  gain 
time  by  the  delay  inseparable  from  payments  in  such  a  diminutive 
coin,  until  a  part  of  the  paper  in  its  possession  had  fallen  due.  The 
discount  bank  of  Paris,  in  the  year  1788,  being  then  under  control 
of  government,  had  recourse  to  similar  paltry  expedients. 

The  profits  of  banks  of  circulation  are  very  considerable ;  that 
portion  of  the  notes,  which  is  issued  on  the  credit  of  private  com- 
mercial paper,  continues  running  at  interest ;  for  the  advances  have 
been  made  with  the  deduction  of  the  discount.  But  the  portion  pf 
the  paper,  issued  on  the  credit  of  the  specie  in  reserve,  brings  no 
profit ;  the  interest  lying  dormant  in  the  specie  thus  withdrawn  from 
circulation. 

The  banks  of  England  and  France  make  no  advances  to  private 
persons,  except  on  bills  of  exchange,  and  give  no  credit  beyond  the 
funds  in  hand.  They  indemnify  themselves  for  the  trouble  01 
receiving  and  paying  on  account  of  individuals  by  turning  to 
account  the  floating  balance  left  in  their  hands.  These  two  estab- 
lishments have,  besides,  undertaken  the  business  of  paying  the  inter- 
est upon  the  respective  national  debts,  receiving  an  allowance  for 
their  trouble  :  furthermore,  they  occasionally  make  advances  to  the 
governments. 

From  these  various  operations,  they  derive  a  great  increase  of 
their  profits.  The  one  last  mentioned,  however,  is  completely  at 
variance  with  the  purposes  of  their  establishment,  as  we  shall  pre- 
sently find.  The  advances  made  to  the  old  government  of  France 
by  the  then  bank  of  discount,  and  those  of  the  bank  of  England  to 
the  English  government,  compelled  those  bodies  to  apply  to  the 
respective  legislatures  to  give  their  notes  a  compulsory  circulation ; 
thus  destroying  their  fundamental  requisites  of  convertibility.  The 
consequence  has  been,  that  the  former  of  these  banks  went  all  to 
pieces. 

The  establishment  of  several  banks,  for  the  issue  of  convertible 
notes,  is  more  beneficial  than  the  investment  of  any  single  body 
with  the  exclusive  privilege ;  for  the  competition  obliges  each  of 
them  to  court  the  public  favour,  by  a  rivalship  of  accommodation 
and  solidity. 

Banks  of  circulation  issue  their  notes  either  in  the  discount  ol 
promissory  notes  or  bills  of  exchange,  that  is  to  say,  in  giving  their 
notes  payable  on  demand,  and  circulating  like  cash,  in  exchange  foi 
private  paper  payable  at  a  future  date,  upon  which  interest  is  deduct- 
ed ;  which  is  the  course  pursued  by  the  present  bank  of  France,  anu 
by  all  the  English  banks,  public  and^rivate ;  or  else  in  lending  at 


272  ON  PRODUCTION.  BOOK  1. 

interest  to  solvent  individuals,  like  those  of  Scotland.  Merchants  of 
good  credit  are,  in  the  latter  way,  supplied  with  the  sums  necessary 
for  their  current  expenses  and  payments,  and  each  of  them  is  thereby 
enabled  to  embark  his  whole  capital  in  his  commercial  enterprises, 
without  being  obliged  to  reserve  any  part  to  meet  the  calls  upon  him 
in  the  course  of  business.  The  merchant  of  Paris  or  London  must 
contrive  matters,  so  as  to  have  always  on  hand  either  in  his  private 
coffers  or  in  the  bank,  a  sum  sufficient  to  face  the  demands  upon 
him;  whereas,  the  merchant  of  Edinburgh  is  relieved  from  this 
necessity,  and  at  liberty  to  invest  the  whole  of  his  funds,  in  the  con- 
fidence that  the  bank  will  advance  him  the  money  he  may  happen 
to  require,  (a) 

A  bank  of  circulation  affords  the  advantage  of  economizing  capi- 
tal, by  reducing  the  amount  of  the  sum,  kept  in  reserve  for  the  cur- 
rent and  contingent  expenses  of  the  individuals  it  accommodates. 

Bank  bills  or  notes,  payable  on  demand,  and  circulating  as  cash, 
play  so  important  a  part  in  the  progress  of  national  wealth,  and 
have  engendered  such  important  errors  in  the  brain  'of  many  writers 
of  repute  and  information  on  other  topics,  that  it  will  be  worth  while 
to  examine  their  nature  and  consequences  in  a  very  particular 
manner. 

I  should  premise,  that  the  residue  of  this  section  applies  ex- 
clusively to  bank-notes,  depending  solely  upon  the  credit  of  the 
bank  for  their  currency,  and  convertible  at  pleasure  into  cash  or 
specie. 

It  is  a  matter  of  no  less  curiosity  than  of  importance,  to  inquire 
whether  bank-notes,  or  paper  destitute  of  intrinsic  value,  be  any 
addition  to  the  stock  of  national  wealth,  and  what,  if  any,  is  the  pos- 
sible extent  of  that  addition ;  for,  were  there  no  limits  to  it,  there 
could  be  no  end  to  the  wealth,  that  a  state  might  acquire  in  a  short 
time  by  the  mere  fabrication  of  some  reams  of  paper.  The  solution 
of  this  grand  problem  may  be  set  down  as  one  of  Smith's  happiest 
efforts ;  yet  it  is  not  every  body  that  comprehends  his  reasoning ;  I 
will  try  to  render  it  more  generally  intelligible. 

The  wants  of  a  nation  require  a  certain  supply  of  such  particular 
commodity,  and  the  extent  of  that  supply  is  determined  by  the  rela- 
tive prosperity  of  the  nation  for  the  time  being.  A  surplus  of  each 
of  those  commodities  beyond  this  demand  is  either  not  produced  at 
all,  or,  if  produced,  must  occasion  a  decline  of  relative  local  value: 
it,  therefore,  naturally  finds  its  way  out  of  the  country,  and  goes  in 
quest  of  a  market,  where  it  may  be  in  higher  estimation. 

Money  is,  in  this  respect,  like  all  other  commodities ;  it  is  a  con- 

(a)  The  two  methods  resolve  themselves  practically  into  one ;  for  merchant? 
ut  pood  credit  can  always  procure  discountable  paper;  and  the  sole  essential 
difference  is,  that,  in  one  case,  the  credit  is  individual  and  unevidenced,  in  the 
other,  evidenced,  and,  in  most  cases,  joint  also.  The  bank  of  England  requires 
the  names  of  more  than  one  firm  on  the  paper  it  discounts.  Country  bankers 
often  content  themselves  with  the  security,  or  note  of  hand,  of  the  borrower 
» 'one.  T 


CHAP.  XXII.  ON  PRODUCTION.  •        273 

vcnient  agent,  and,  therefore,  employed  as  such  in  all  operations  of 
exchange ;  but  the  intensity  of  the  demand  for  it  is  determined  in 
each  community,  by  the  relative  extent  and  activity  of  the  exchanges 
negotiated  within  it.  As  soon  as  there  is  a  supply  of  money  suffi- 
cient to  circulate  all  the  commodities  there  are  to  be  circulated,  no 
more  money  is  imported ;  or,  if  a  surplus  flow  in,  it  emigrates  again 
in  quest  of  a  market,  where  its  value  is  greater,  or  where  its  utility 
is  more  desired.  It  is  seldom  or  never  that  any  body  keeps  in  his 
purse  or  his  coffers  more  specie  than  enough  to  meet  the  current 
demands  of  his  business  or  consumption.*  Every  excess  beyond 
these  demands  is  rejected,  as  bearing  neither  utility  nor  interest ; 
and  the  community  at  large  is  fully  supplied  with  specie,  as  soon  as 
each  individual  is  possessed  of  the  portion  suitable  to  his  condition 
and  relative  station  in  society. 

It  may  be  safely  left  to  private  interest,  to  make  the  best  use  of 
the  excess  of  specie  beyond  the  demand  for  circulation.  The  notion 
that  every  item  of  specie,  that  crosses  the  frontier,  is  so  much  dead 
loss  to  the  community,  is  just  as  absurd  as  the  supposition,  that  a 
manufacturer  is  so  much  the  poorer,  every  time  he  parts  with  his 
money  in  the  purchase  of  the  ingredient  or  raw  material  of  his  manu- 
facture ;  or  that  individuals,  the  aggregate  of  whom  makes  up  the 
nation,  present  foreigners  gratuitously  with  all  the  money  they  part 
with. 

Taking  it  for  granted,  then,  that  the  specie,  remaining  in  circula- 
tion within  the  community,  is  limited  by  the  national  demand  for 
circulating  medium;  if  any  expedient  can  be  devised,  for  substi- 
tuting bank-notes  in  place  of  half  the  specie  or  the  commodity, 
money,  there  will  evidently  be  a  superabundance  of  metal-money, 
and  that  superabundance  must  be  followed  by  a  diminution  of  its 
relative  value.  But,  as  such  diminution  in  one  place  by  no  means 
implies  a  contemporaneous  diminution  in  other  places,  where  the 
expedient  of  bank-notes  is  not  resorted  to,  and  where,  consequently, 
no  such  superabundance  of  the  commodity,  money,  exists,  money 
naturally  resorts  thither,  and  is  attracted  to  the  spot  where  it  bears 
the  highest  relative  value,  or  is  exchangeable  for  the  largest  quantity 
of  other  goods:  in  other  words,  it  flows  to  the  markets  where  com- 
modities are  the  cheapest,  and  is  replaced  by  goods,  of  value  equal 
to  the  money  exported. 

The  money  that  can  emigrate  in  this  manner,  is  that  part  only  of 
the  circulating  medium,  which  has  a  value  elsewhere  than  within  the 
limits  of  the  nation ;  that  is  to  say,  the  specie  or  metal-money.  Since, 
however,  specie  does  not  emigrate  without  an  equivalent  return; 
and,  since  its  value,  which  before  existed  in  the  shape  of  specie,  and 
was  exclusively  engaged  in  facilitating  circulation,  thenceforth 
assumes  the  form  of  a  variety  of  commodities,  all  items  of  the  repro- 
ductive national  capital,  there  follows  this  remarkable  consequence, 
that  the  national  capital  is  enlarged  to  the  full  amount  of  all  the  spo 

*No  account  is  here  taken  of  the  money  hoarded,  which,  for  the  national  :u- 
terest,  might  just  as  well  have  remained  in  the  mine. 

2K 


274  ON  PRODUCTION.  BOOK  L 

cie  exported  upon  the  introduction  of  the  substitute.  Nor  is  the 
internal  national  circulation  at  all  cramped  for  want  of  money  by 
this  export ;  for  the  functions  of  the  specie,  that  has  been  withdrawn, 
are  just  as  well  performed  by  the  paper  substituted  in  its  stead. 

However  valuable  an  acquisition  the  national  capital  may  thus 
receive,  it  must  not  be  rated  above  its  real  amount.  I  have  supposed, 
for  the  sake  of  simplicity,  that  half  the  specie  might  be  replaced  by 
circulating  notes :  but  this  is  a  monstrous  proportion ;  particularly  if 
it  be  considered,  that  paper  cannot  retain  its  value  as  money  any 
longer  than  while  it  is  readily  and  instantly  convertible  into  specie ; 
I  say,  readily  and  instantly,  because  otherwise  people  would  prefer 
specie,  which  is  at  all  times,  and  without  the  least  hesitation,  taken 
for  money.  To  insure  this  requisite  convertibility,  it  is  necessary, 
that,  besides  having  at  all  times  a  fund  in  reserve,  in  private  bills  or 
securities,  or  in  specie,  sufficient  to  meet  all  the  notes  that  may  be 
presented,  the  bank  itself  should  be  at  all  times  within  the  reach  of 
the  holders  of  its  notes.  Therefore,  if  the  territory  be  of  any  extent, 
and  the  notes  so  generally  circulated,  as  to  form  half  of  the  circu- 
lating medium,  the  subordinate  offices  of  the  bank  must  be  greatly 
multiplied  to  place  them  within  reach  of  all  the  note-holders. 

But,  granting  the  possibility  of  such  an  arrangement,  and  admit- 
ting, that  paper  might  supplant  as  much  as  half  the  requisite  national 
currency  of  specie,  let  us  see  what  would  be  the  amount  of  the  ac- 
quisition to  the  national  capital. 

No  writer  of  repute  has  ventured  to  estimate  the  requisite  circu- 
lating specie  of  any  nation,  higher  than  £  of  the  annual  national 
product;  some,  indeed,  have  reckoned  it  as  low  as  ^  Taking 
the  highest  estimate,  viz.  }  of  the  annual  product,  which,  for  my 
own  part,  I  consider  greatly  above  the  reality  in  any  case ;  a  nation, 
whose  annual  product  should  amount  to  20  millions,  would  need  but 
4  millions  of  specie.  Therefore,  in  case  the  half,  or  2  millions, 
were  supplanted  by  circulating  paper,  and  employed  in  augmenting 
the  national  productive  capital,  that  capital  would  be  once  for  all 
augmented,  by  a  value  equal  to  -/ff  or  TV  of  the  annual  product  of 
the  nation. 

Again,  the  annual  product  of  a  nation  would,  probably,  be  much 
overrated  at  TV  of  the  gross  national  productive  capital ;  but  let  it 
be  set  down  at  that  rate,  allowing  5  per  cent,  interest  on  productive 
capital,  and  5  per  cent,  wages  and  profits  of  the  industry  it  sets  in 
motion.  On  this  calculation,  supposing  the  paper  substitute  to  add 
lo  the  national  capital,  in  the  ratio  of  T'ff  of  its  annual  product,  this 
addition  will  not  at  the  highest  estimate  exceed  T£o  of  the  previous 
t.apital. 

Although  the  practicable  issue  of  bank-notes  procures  to  a  nation 
of  moderate  wealth  an  accession  of  capital,  much  less  considerable 
than  people  may  fondly  imagine,  this  accession  is,  notwithstanding, 
of  very  great  value;  for,  unless  the  productive  energy  of  the  nation 
be  extremely  great,  as  in  Great  Britain,  or  the  national  spirit  of 
frugality  very  general  and  persevering,  as  in  Holland,  the  annual 


CHAP.  XXIL  ON  PRODUCTION.  375 

savings  withdrawn  from  unproductive  consumption,  to  be  added  to 
productive  capital,  form,  even  in  thriving  states,  a  very  inconsidera- 
ble portion  of  the  gross  annual  revenue.  Nations,  whose  production 
is  stationary,  as  every  body  knows,  make  no  addition  to  their  pro- 
ductive capitals;  and  the  consumption  of  those  on  the  decline  an- 
nually encroaches  on  their  capitals. 

Should  the  paper-issues  of  a  bank  at  any  time  exceed  the  demands 
of  circulation,  and  the  credit  enjoyed  by  the  establishment,  there 
follows  a  perpetual  reflux  of  its  notes,  and  it  is  put  to  the  expense  of 
collecting  specie,  which  is  absorbed  as  fast  as  collected.  The  Scotch 
banks,  though  productive  of  great  benefit,  have  been  obliged,  upon 
such  trying  occasions,  to  keep  agents  in  London  constantly  employ- 
ed, in  scraping  specie  together  at  a  charge  of  two  per  cent.,  which 
specie  was  instantly  absorbed.  The  bank  of  England,  in  similar 
circumstances,  was  under  the  necessity  of  buying  gold  bullion,  and 
getting  it  coined ;  and  this  coin  was  melted  again  as  fast  as  it  was 
paid  by  the  bank,  in  consequence  of  the  high  price  of  the  metal, 
which  was  itself  the  effect  of  the  constant  purchases  made  by  the 
bank,  to  meet  the  calls  upon  it  for  specie.  In  this  manner,  it  sus- 
tained the  annual  loss  of  from  2£  to  3  per  cent.,  upon  a  sum  of  about 
850,000£,*  more  than  20  millions  of  our  money.  I  say  nothing  of 
the  situation  of  this  bank  of  late  years,  since  its  notes  have  acquired 
a  forced  circulation,  and,  consequently,  altered  their  nature  entirely. 

The  notes  issued  by  a  bank  of  circulation,  even  if  it  have  no  funds 
of  its  own,  are  never  issued  gratuitously ;  and,  therefore,  of  course, 
imply  the  existence,  in  the  coffers  of  the  bank,  of  a  value  of  like 
amount,  either  in  the  shape  of  specie,  or  of  securities,  bearing  in- 
terest ;  upon  which  latter  only  the  whole  real  advance  of  the  bank  is 
made ;  and  this  advance  can  never  be  made  upon  securities  that  have 
a  long  time  to  run;  for  the  securities  are  the  fund,  that  is  to  provide 
for  the  discharge  of  another  class  of  securities,  in  the  hands  of  the 
public  at  large,  payable  at  the  shortest  of  all  possible  notice,  namely, 
on  demand.  Strictly  speaking,  a  bank  can  not  be  at  all  times  in  a 
condition  to  face  the  calls  upon  it,  and  deserve  the  entire  confidence 
of  the  public,  unless  the  private  paper  it  has  discounted,  be  all,  like 
its  own  notes,  payable  on  demand ;  but,  as  it  is  no  easy  matter  to 
find  substantial  assets,  that  shall  bear  interest,  and  at  the  same  time 
be  redeemable  at  sight,  the  next  best  course  is  to  confine  its  issues 
to  bills  of  very  short  dates;  and,  indeed,  well-conducted  banks  have 
always  rigidly  adhered  to  this  principle. 

Prom  the  preceding  considerations  may  be  deduced  a  conclusion, 
fatal  to  abundance  of  systems  and  projects,  viz.  that  credit-paper  can 
supplant,  and  that  but  partially,  nothing  more  than  that  portion  of 
the  national  capital  performing  the  functions  of  money,  which  cir- 
culates from  hand  to  hand,  as  an  agent  for  the  facility  of  transfer; 
consequently,  that  no  bank  of  circulation,  or  credit-paper  of  any  de 
nomination  whatever,  can  supply  to  agricultural,  manufacturing,  or 

*  Wealth  of  Nations,  book  ii.  «.  2. 


i>76  ON  PRODUCTION.  BOOK  L 

commercial  enterprise,  any  funds  for  the  construction  of  ships  or 
machinery,  for  the  digging  of  mines  or  canals,  for  the  bringing  of 
waste  land  into  cultivation,  or  the  commencement  of  'long-winded 
speculations ;  any  funds,  in  short,  to  be  employed  as  vested  capital. 
The  indispensable  requisite  of  credit-paper  is,  its  instant  converti- 
bility into  specie ;  when  the  sum  total  of  the  paper  issued  does  not 
exist  in  the  coffers  of  the  bank,  under  the  shape  of  specie,  the  deficit 
should  at  least  be  supplied  by  securities  of  very  short  dates ;  where- 
as, an  establishment,  that  should  lend  its  funds  to  be  vested  in  enter- 
prises, whence  they  could  not  be  withdrawn  at  pleasure,  could  never 
be  prepared  with  "such  securities.  An  example  will  illustrate  this 
position.  Suppose  a  bank  of  circulation  to  lend  6,000  dollars  oi 
its  notes,  circulating  as  cash,  to  a  landholder  on  mortgage  of  his 
land,  presenting  the  amplest  security.  This  loan  is  destined  by  the 
landholder  to  the  construction  of  necessary  buildings,  for  the  culti- 
vation of  the  estate ;  for  which  purpose  he  contracts  with  a  builder 
and  pays  him  the  6,000  dollars  of  notes  advanced  by  the  bank. 
Now,  if  the  builder,  after  a  short  lapse  of  time,  be  desirous  of  turn- 
ing the  notes  into  specie,  the  bank  can  not  pay  him  by  a  transfer  of 
the  mortgage.  The  only  property  the  bank  has  to  meet  the  6,000 
dollars  of  notes  is  a  security,  ample  beyond  doubt,  but  not  available 
at  the  moment. 

The  securities  in  the  hands  of  a  bank,  I  hold  to  be  a  solid  basis 
for  the  whole  of  its  issues  of  notes,  provided  those  securities  be  of 
solvent  persons,  and  have  not  too  long  to  run ;  for  the  securities  will 
be  redeemed  either  with  specie,  or  with  the  notes  of  the  bank  itself. 
In  the  first  case,  the  bank  is  supplied  with  the  means  of  paying  its 
notes ;  in  the  second,  it  is  saved  the  trouble  of  providing  for  them. 

If,  by  any  circumstance,  the  notes  be  deprived  of  their  power  of 
circulating  as  specie,  the  task  of  replacing  the  metal  for  the  paper- 
money  does  not  devolve  upon  the  bank ;  nor  was  it  at  the  first  sad- 
dled with  the  business  of  turning  to  account  the  metal-money  its 
notes  rendered  superfluous.  For,  as  we  have  already  observed,  the 
bank  can  extinguish  the  whole  of  its  paper  with  the  private  securi- 
ties it  holds.  The  inconvenience  falls  upon  the  public,  which  is 
under  the  necessity  of  finding  a  new  agent  of  circulation,  either  by 
a .  re-import  of  the  metal-money,  or  by  the  substitution  of  private 
paper;  but  probably  the  public  would,  in  such  circumstances,  apply 
again  to  a  bank  conducted  on  sound  principles.* 

*  Since  the  first  publication  of  this  passage,  this  very  circumstance  has  hap- 
pened in  respect  to  the  bank  of  Paris,  in  1814  and  1815,  when  that  capital  was 
besieged  and  occupied  by  the  allied  armies.  The  advances  of  the  bank  to  the 
government,  and  to  individuals,  which  could  not  be  recalled  immediately,  did 
not  exceed  the  capital  of  the  establishment,  for  which  the  shareholders  can  not 
be  called  upon ;  and  its  paper-issues,  payable  to  bearer,  were  all  covered,  either 
bv  specie  in  hand,  or  by  commercial  paper  of  short. dates.  By  this  means,  not- 
Withstanding  the  very  critical  circumstances  of  the  moment,  the  merchants  con- 
tinued to  employ  its  notes.:  which  they  could  not  well  do  without;  and  they 
wore  pnid  as  usual  in  cash  without  interruption,  during  the  whole  of  the  hostile 
occupation :  which  shows  at  once  the  utility  of  a  bank  of  circulation,  and  the 
•uivantage  of  leaving  inviolate  the  convertibility  of  paper-issues. 


CHAP.  XXII.  ON  PRODUCTION. 

This  will  serve  to  explain,  why  so  many  schemes  of  agricultural 
banks  for  the  issue  of  circulating  and  convertible  notes  on  ample 
landed  security,  and  so  many  other  schemes  of  a  similar  nature,  havo 
fallen  to  the  ground  in  very  little  time,  with  more  or  less  loss  to  the 
shareholders  and  the  public.*  Specie  is  equivalent  to  paper  of  per- 
fect solidity,  and  payable  at  the  moment ;  consequently  it  can  only 
be  supplanted  by  notes  of  unquestionable  credit,  and  payable  on  de- 
mand ;  and  such  notes  cannot  be  discharged  by  a  bare  security,  even 
of  the  best  possible  kind. 

For  the  same  reason,  bills  of  exchange  in  the  nature  of  accommo- 
dation-paper, as  it  is  called,  can  never  be  a  sound  basis  for  an  issue 
of  convertible  paper.  Such  bills  of  exchange  are  paid  when  due  by 
fresh  bills,  that  have  a  further  term  to  run,  and  are  negotiated  with 
the  deduction  of  discount.  When  the  latter  fall  due,  they  are  met 
by  a  third  set  payable  at  a  still  later  date,  which  are  discounted  in 
like  manner.  If  the  bank  discounts  such  bills,  the  operation  is  no 
more  than  an  expedient  for  borrowing  of  the  bank  in  perpetuity ; 
the  first  loan  being  paid  with  a  second,  the  second  with  the  third, 
and  so  on.  And  the  bank  experiences  the  evil  of  issuing  more  of 
its  notes,  than  the  circulation  will  naturally  absorb,  and  the  credit  of 
the  establishment  will  support ;  for  the  notes,  borrowed  upon  such 
bills,  do  not  help  to  circulate  and  diffuse  real  value,  because  they 
represent  and  contain  no  real  value  themselves ;  consequently,  they 
continually  recur  to  be  exchanged  for  specie.  It  is  on  this  account, 
that  the  discount-bank  of  Paris,  while  it  continued  to  be  well  ad- 
ministered, did,  as  the  present  banks  of  France  and  England  do  still 
refuse,  as  far  as  it  is  able,  to  discount  accommodation-paper. 

The  consequences  are  similar  and  equally  mischievous,  when  a 
bank  makes  advances  to  government  in  perpetuity,  or  even  for  a 
very  long  period,  (a)  This  was  the  cause  of  the  failure  of  the  bank 
of  England.  Not  being  able  to  obtain  payment  from  government, 
it  was  unable  to  withdraw  the  notes  in  which  the  loan  was  made. 
From  that  moment  its  notes  ceased  to  be  convertible;  and  until  the 
resumption  of  cash  payments  in  1822,  enjoyed  a  forced  circulation. 
The  government,  being  itself  unable  to  supply  the  bank  with  the 
means  of  payment,  discharged  that  body  from  its  liability  to  its  own 
creditors.f 

*  In  1803,  the  land-bank  of  Paris  was,  for  this  reason,  obliged  to  suspend  the 
payment  of  its  notes  in  cash ;  and  to  give  notice,  that  they  would  be  paid  off  by 
instalments  out  of  the  proceeds  of  its  real  securities. 

f  Thornton,  in  his  tract  on  the  Paper  Credit  of  Great  Britain,  written  expressly 

(o)  That  is  to  say,  advances  its  notes.  A  bank,  like  an  individual,  may  ad- 
vance its  capital,  which  then  becomes  more  or  less  vested  and  fixed.  The  whole 
capital  of  the  bank  of  England  has  been  thus  advanced ;  and  there  would  have 
been  no  danger,  had  it  not  advanced  its  notes  also.  When  the  advances  of  paper 
are  made  upon  transferable  securities,  stock,  exchequer  bills,  and  the  like,  those 
securities  may  be  sold  for  cash,  or  for  the  notes  of  the  bank  itself,  so  long  as 
they  rr-tain  their  value,  and  thus  the  safety  and  solvency  of  the  bank  maintained. 
But  this  operation  is  unnecessarily  complex;  for  the  government  might  itsel^ 
have  sold,  and  thus  have  saved  the  brokerage  or  profit  accruing  upon  the  opera 
linn  to  the  bank.  T. 
24 


278 


ON  PRODUCTION.  •     BOOK  L 


The  holders  of  the  notes  of  a  bank  issuing  convertible  money  run 
little  or  no  risk,  so  long  as  the  bank  is  well  administered,  and  inde- 
j>endent  of  the  government.  Supposing  a  total  failure  of  confidence 
to  bring  all  its  notes  upon  it  at  once  for  payment,  the  worst  that  can 
happen  to  the  holders  is,  to  be  paid  in  good  bills  of  exchange  at 
short  dates,  with  the  benefit  of  discount ;  that  is  to  say,  to  be  paid 
with  the  same  bills  of  exchange,  whereon  the  bank  has  issued  its 
notes.  If  the  bank  have  a  capital  of  its  own,  there  is  so  much  addi- 
tional security ;  but,  under  a  government  subject  to  no  control,  or  to 
nominal  contiol  only,  neither  the  capital  of  the  bank,  nor  the  assets 
in  its  hands,  offer  any  solid  security  whatever.  The  will  of  an  arbi- 
trary prince  is  all  the  holders  have  to  depend  upon :  and  every  act 
of  credit  is  an  act  of  imprudence. 

As  far  as  I  am  capable  of  judging,  such  is  the  effect  of  banks  of 
circulation  and  of  their  paper  issues  upon  individuals  and  national 
wealth.  This  effect  is  described  by  Smith  in  a  quaint  and  ingenious 
metaphor.  The  capital  of  a  nation  he  likens  to  an  extensive  tract 
of  country,  whereupon  the  cultivated  districts  represent  the  produc- 
tive capital,  and  the  high  roads  the  agent  of  circulation,  that  is  to 
say,  the  money,  that  serves  as  the  medium  to  distribute  the  produce 
among  the  several  branches  of  society.  He  then  supposes  a  machine 
to  be  invented,  for  transporting  the  produce  of  the  land  through  the 
air ;  that  machine  would  be  the  exact  parallel  of  credit-paper. 
Thenceforward  the  high  roads  might  be  devoted  to  cultivation. 
'  The  commerce  and  industry  of  the  country,  however,'  he  .con- 
tinues, '  though  they  may  be  somewhat  augmented,  cannot  be  alto- 
gether so  secure,  when  they  are  thus,  as  it  were,  suspended  upon  the 
Daedalian  wings  of  paper-money,  as  when  they  travel  about  upon  the 

with  a  view  to  justify  the  suspension  of  cash-payments  by  that  establishment, 
has  attacked  the  positions  of  Smith  upon  this  subject.  He  tells  us,  that  the 
extraordinary  run  upon  the  bank,  which  brought  about  the  suspension,  was  oc- 
casioned,  not  by  the  excess  of  its  issues,  but,  on  the  contrary,  by  their  partial 
contraction.  "  An  excessive  limitation  of  bank-notes,"  he  observes,  "  will  pro- 
duce failures,  failures  must  cause  consternation,  and  consternation  must  lead  to 
a  run  upon  the  bank  for  guineas."  By  this  reference  to  an  extreme  case,  he  en- 
deavours to  support  his  paradoxical  opinions.  When  a  convertible  paper  has 
succeeded  in  driving  out  of  the  country  too  large  a  portion  of  the  metallic  money, 
and  the  confidence  in  the  paper  happens  suddenly  to  decline,  great  confusion  and 
embarrassment  will  doubtless  ensue,  because  the  remaining  agent  of  circulation 
is  insufficient  to  effect  the  business ;  but  it  is  a  great  mistake  to  suppose,  that 
the  deficiency  can  be  remedied  by  the  multiplication  of  a  paper,  not  enjoying  the 
confidence  of  the  public.  If  the  bank  of  England  was  able  to  survive  the  shock, 
it  was  because  of  the  indispensable  necessity  of  some  agent  of  transfer,  of  some 
money  or  other,  of  paper  in  default  of  all  others,  in  so  commercial  a  country  ;  be- 
cause the  government  and  the  bankers  of  London,  who  w"ere  interested  in  the 
safety  of  the  bank,  unanimously  agreed  not  to  call  upon  it  for  cash,  until  it  should 
be  in  a  condition  to  pay ;  that  is  to  say,  until  the  government  should  have  paid 
its  advances  in  actual  value.  The  bank  had  lent  to  the  government  more  than 
its  whole  capital ;  for  to  that  extent  it  might  have  gone  with  safety,  its  capital 
not  being  wanted  for  the  discharge  or  convertibility  of  its  paper ;  had  it  not  so 
done,  the  short  bills  in  its  possession  would  have  been  sufficient  for  the  extinc- 
tion of  its  convertible  paper. 


CHAP.  XXIL  ON  PRODUCTION.       x  279 

solid  ground  of  gold  and  silver.  Over  and  above  the  accidents,  to 
which  they  are  exposed  from  the  unskilfulness  of  the  conductors  of 
this  paper-money,  they  are  liable  to'  several  others,  from  which  no 
prudence  or  skill  of  those  conductors  can  guard  them.  An  unsuc- 
cessful war,  for  example,  in  which  the  enemy  get  possession  of  the 
capital,  and  consequently  of  that  treasure,  which  supported  the  credit 
of  the  paper-money,  would  occasion  a  much  greater  confusion  in  a 
country,  where  the  whole  circulation  was  carried  on  by  paper,  than 
in  one,  where  the  greater  part  of  it  was  carried  on  by  gold  and  silver 
The  usual  instrument  of  commerce  having  lost  its  value,  no  ex- 
changes could  be  made  except  by  barter  or  upon  credit.  All  taxes 
having  usually  been  paid  in  paper-money,  the  prince  would  not  have 
wherewithal  either  to  pay  his  troops,  or  to  furnish  his  magazines ; 
and  the  slate  of  the  country  would  be  much  more  irretrievable,  than 
if  the  greater  part  of  its  circulation  had  consisted  in  gold  and  silver. 
A  prince,  anxious  to  maintain  his  dominions  at  all  times  in  the  state 
in  which  he  can  most  easily  defend  them,  ought  upon  this  account 
to  guard,  not  only  against  that  excessive  multiplication  of  paper- 
money,  which  ruins  the  very  banks  which  issue  it,  but  even  against 
that  multiplication  of  it,  which  enables  them  to  fill  the  greater  part 
of  the  circulation  of  the  country  with  it.'* 

Forgery  alone  is  enough  to  derange  the  affairs  of  the  be'st  con- 
ducted and  most  solid  bank.  And  forgery  of  notes  is  more  to  be 
apprehended,  than  counterfeits  of  specie.  The  stimulus  of  gain  is 
greater.  For  there  is  more  profit  to  be  made  by  converting  a  sheet 
of  paper  into  money,  than  by  giving  the  appearance  of  precious 
metal  to  another  metal,  that  has  some  though  very  little,  intrinsic 
value,  especially  if  it  be  compounded  or  covered  with  a  small  por- 
tion of  the  counterfeited  metal;  and  perhaps,  too,  the  materials  for 
the  former  operation  are  less  liable  to  discovery.  Besides,  the  coun-  ' 
terfeits  of  specie  can  never  reduce  the  value  of  the  specie  itself, 
because  the  latter  has  an  intrinsic  and  independent  value  as  a  com- 
modity ;  whereas,  the  mere  belief  that  there  are  forged  notes  abroad, 
so  well  executed,  as  to  be  scarcely  distinguishable  from  the  genuine, 
•  s  enough  to  bring  both  forged  and  genuine  into  discredit.  For 
which  reason,  banks  have  sometimes  preferred  the  loss  of  paying 
notes  they  know  to  be  forged,  to  the  hazard  of  bringing  the  genuine 
ones  into  discredit,  by  the  exposure  of  the  fraud. 

One  method  of  checking  the  immoderate  use  of  notes  is,  to  limit 
them  to  a  fixed  and  high  denomination  of  value ;  so  as  to  make  them 
adapted  to  the  circulation  of  goods  from  one  merchant  to  another, 
but  inconvenient  for  the  circulation  between  the  merchant  and  the 
consumer.  It  has  been  questioned  whether  a  government  has  any 
right  to  prohibit  the  issue  of  small  notes,  where  the  public  is  willing 
to  take  them;  and  whether  such  limitation  be  not  a  violation  of  that, 
liberty  of  commerce,  which  it  is  the  chief  duty  of  a  government  to 
protect.  But  the  right  undoubtedly  is  just  as  complete,  as  that  of 

*  Wealth  of  Nations,  book  ii.  chap.  2. 


2ftO  ON  PRODUCTION.  BOOK  I. 

ordering  a  building  to  be  pulled  down,  because  it  endangers  the 
public  safety. 

SECTION  IV. 
Of  Paper-Money. 

The  distinctive  appellation  of  paper-money,  I  have  reserved 
exclusively  for  those  obligations,  to  which  the  ruling  power  may 
give  a  compulsory  circulation  in  payment  for  all  purchases,  and 
discharge  all  debts  and  contracts,  stipulating  a  delivery  of  money. 
I  call  them  obligations,  because,  though  the  authority  that  issues, 
is  not  bound  to  redeem  them,  at  least  not  immediately,  yet  they 
commonly  express  a  promise  of  redemption  at  sight,  which  is  abso- 
lutely nugatory ;  or  of  redemption  at  a  date  expressed,  for  which 
there  is  no  sort  of  security ;  or  of  territorial  indemnity,  the  value  of 
which  we  shall  presently  inquire  into. 

Such  obligations,  whether  subscribed  by  the  government  or  by 
individuals,  can  be  converted  into  paper-money  by  the  public  au- 
thority only,  which  alone  can  authorise  ihe  owners  of  money  to  pay 
in  paper.  The  act  is,  indeed,  an  exertion,  not  of  legitimate,  but  of 
arbitrary  authority ;  being  a  deterioration  of  the  national  money  in 
the  extreme  degree. 

Upon  the  principles  above  established,  it  should. seem,  that  a  mo- 
ney destitute  of  all  value  as  a  commodity,  ought  to  pass  for  none  in 
all  free  dealing  subsequent  to  its  issue ;  and  this  is  always  the  case 
in  practice  sooner  or  later.  The  notes  of  what  was  improperly 
called  Law's  Bank,  and  the  assignats  issued  during  the  French 
revolution,  were  never  regularly  called  in  or  cancelled ;  yet  those  of 
the  highest  denomination  would  not  pass  at  present  for  a  single  so/. 
How  then,  came  they  ever  to  pass  for  more  than  their  real  value? 
Because  there  are  many  expedients  of  fraud  and  violence,  which 
will  always  have  a  temporary  efficacy. 

In  the  first  place,  a  paper,  wherewith  debts  can  be  legally,  though 
fraudulently,  discharged,  derives  a  kind  of  value  from  that  single 
circumstance.  Moreover,  the  paper-money  may  be  made  efficient 
to  discharge  the  perpetually  recurring  claims  of  public  taxation. 
Sometimes  a  tariff"  or  maximum  of  price  is  established  ;  which,  in- 
deed, soon  extinguishes  the  production  of  the  commodities  affected 
by  it,  but  gives  to  the  paper-money  a  portion  of  the  value  of  those 
actually  in  existence.  Besides,  the  very  creation  of  a  paper-money 
with  forced  circulation  occasions  the  disappearance  of  metallic  mo- 
ney ;  for,  as  it  is  made  to  pass  at  par  with  paper,  it  naturally  seeks  a 
market,  where  it  can  find  its  true  level  of  value.  The  paper-money 
is  thus  left  in  the  exclusive  possession  of  the  business  of  circulation; 
and  the  absolute  necessity  of  some  agent  of  transfer,  in  every  civil- 
ized community,  will  then  operate  to  maintain  its  value.*  So  urgent 

*  Wherever  a  paper-money  has  been  established,  the  difference  between  its 


CHAP.  XXII.  ON  PRODUCTION.  251 

is  this  necessity,  that  the  paper-money  of  England,  consisting  of  the 
notes  of  the  bank,  has  been  kept  at  par  with  specie,  simply  by  the 
limitation  of  the  issues  to  the  demands  of  circulation. 

Nations  precipitated  into  foreign  wars,  before  they  have  had  time 
previously  to  accumulate  the  requisite  capital  for  carrying  them  on, 
and  destitute  of  sufficient  credit  to  borrow  of  their  neighbours,  have 
almost  always  had  recourse  to  paper-money,  or  some  similar  expe- 
dient. The  Dutch,  in  their  struggle  with  the  Spanish  crown  for  in- 
dependence, issued  money  of  paper,  of  leather,  and  of  many  other 
materials.  The  United  States  of  America,  under  similar  circum- 
stances, likewise  had  recourse  to  paper-money ;  and  the  expedient 
that  enabled  the  French  republic  to  foil  the  formidable  attack  Of  the 
first  coalition,  has  immortalized  the  name  of  assignats. 

Law  has  been  unjustly  charged  with  the  whole  blame  of  the 
calamities  resulting  from  the  scheme  that  bears  his  name.  That  he 
entertained  just  ideas  respecting  money,  may  be  gathered  from  tho 
perusal  of  a  tract*  he  published  in  his  native  country,  Scotland,  to 
induce  the  Scotch  government  to  establish  a  bank  of  circulation. 
The  bank  established  in  France,  in  1716,  was  founded  on  the  princi- 
ples there  set  forth.  Its  notes  were  expressed  in  these  words : 

"The  bank  promises  to  pay  the  bearer  at  sight  ******* 
Kvres  in  money  of  the  same  weight  and  standard  as  the  money  of 
this  day.  Value  received  at  Paris,,"  &c. 

The  bank,  which  was  then  but  a  private  association,  paid  its  notes 
regularly  on  demand:  they  were  not  yet  metamorphosed  into  paper- 
money.  Matters  remained  on  this  footing,  and  went  on  very  well, 
till  the  year  1719  ;f  at  which  period  the  king,  or  rather  the  regent, 
repaid  the  shareholders,  and  took  the  management  into  his  own 
hands,  calling  it  the  Royal  Bank.  The  notes  were  then  altered  to 
this  form : 

value  in  the  home  market,  where  it  has  utility,  and  its  value  in  foreign  markets, 
where  it  has  no  utility,  has  afforded  a  fruitful  field  for  speculation,  that  has  en- 
riched many  adventurers.  In  1811,  100  guineas  in  gold  would  purchase  at 
Paris  a  bill  of  exchange  on  London,  for  140Z.  sterling,  payable  in  the  paper  which 
was  the  only  currency  of  England.  Yet  the  difference  between  gold  and  paper 
in  the  London  market  at  the  same  period,  was  only  15  per  cent.  It  was  in  this 
way,  that  the  paper  was  of  higher  value  in  England  than  abroad.  Accordingly, 
I  find  from  returns  with  which  I  have  been  favoured,  that  gold  in  guineas  or 
bullion  was  smuggled  into  the  ports  of  Dunkirk  and  Grayelines  alone,  in  the 
years  1810,  11,  12,  and  13,  to  the  amount  of  33,875,090  dollars.  There  wa»  a 
similar  speculation  in  other  commodities  at  large ;  but  it  was  attended  with  more 
risk  and  difficulty ;  the  import  into  France  being  very  hazardous,  although  the 
export  from  England  was  encouraged  in  every  possible  way.  Yet  this  traffic 
would  soon  have  found  its  level,  for  it  must  have  produced  bills  on  England  in 
such  quantity,  as  to  have  brought  the  exchange  to  par  at  least,  had  not  the  con- 
tinental subsidies  of  England  furnished  a  continual  supply  of  bills  on  London 
without  any  return. 

*This  work  was  translated  into  French  while  Law  continued  in  the  office  of 
Controller-General  of  France ;  and  is  entitled  Considerations  on  Commerce  and 
Money. 

f  Vide  Dutot.  torn.  ii.  p.  200,  for  a  detail  of  the  beneficial  effects  ol  the  insti 
tution,  as  originally  conducted. 

24*  2L 


282  ON  PRODUCTION.  BOOK  L 

"  The  bank  promises  to  pay  the  bearer  at  sight  ******* 
Uvres  in  silver  coin.  Value  received  at  Paris,"  &c. 

This  alteration,  slight  as  it  was  in  appearance,  was  a  radical  one 
in  substance.  The  first  note  stipulated  to  pay  a  fixed  quantity  of 
silver,  viz.  the  quantity  contained  in  the  HVTKS  current  at  the  date 
of  issuing  the  notes.  The  second  merely  engaged  to  pay  Uvres,  and 
so  opened  a  door  for  whatever  alterations  an  arbitrary  power  might 
think  proper  to  make  in  the  real  value  expressed  by  the  word  livre. 
And  this  was  called  fixing  the  rate  of  the  paper-money ;  whereas,  on 
the  contrary,  it  was  unfixing,  and  making  it  a  fluctuating  value ;  and 
the  fluctuations  were  truly  deplorable.  Law  strenuously  opposed 
the  innovation;  but  principle  was  compelled  to  give  way  to  power; 
and  the  crimes  of  power,  when  the  consequences  began  to  be  felt, 
were  confidently  attributed  to  the  fallacy  of  the  principle. 

The  assignats  issued  by  the  revolutionary  government  were 
worth  even  less  than  the  paper-money  of  the  regency.  The  latter 
gave  a  promise,  at  least,  of  paying  in  silver :  and,  though  the  payment 
might  be  greatly  curtailed  by  a  deterioration  of  the  silver  coin,  yet 
sooner  or  later  the  paper  might  have  been  redeemed,  if  the  govern- 
ment had  but  been  more  moderate  in  its  issues,  and  more  scrupulous 
in  fulfilling  its  engagements.  But  the  assignats  conveyed  no  right 
to  call  for  silver;  nothing  but  a  right  to  purchase  or  obtain  the  na 
tional  domains.  Let  us  see  what  this  right  was  really  worth. 

The  original  assignats  purported  to  be  payable  at  sight,  at  the 
Caisse  de  FExtraordinaire,^where  they  were,  in  fact,  never  paid  at 
all.  It  is  true,  they  were  received  in  payment  for  the  national 
domains  bought  by  individuals  at  a  competition-price;  but  the  value 
of  these  domains  could  never  give  any  determinate  value  to  the 
assignats,  because  their  nominal  value  increased  exactly  in  propor- 
tion as  that  of  the  assignats  declined.  The  government  was  not 
sorry  to  find  the  price  of  national  domains  advance,  because  it  was 
thereby  enabled  to  withdraw  a  greater  amount  of  assignats,  and 
consequently,  to  re-issue  new  ones,  without  enlarging  the  quantity 
ufloat.  It  was  not  aware,  that,  instead  of  the  national  domains 
advancing  in  price,  the  assignats  were  undergoing  a  rapid  deprecia- 
tion, and  that  the  further  that  depreciation  was  pushed,  the  more 
assignats  must  be  issued  in  payment  of  an  equal  quantity  of 
supplies. 

The  last  assignats  no  longer  purported  to  be  payable  at  sight. 
The  alteration  was  little  attended  to,  because  neither  first  nor  last 
were,  in  fact,  ever  paid  at  all.  But  their  vicious  origin  was  made 
more  apparent.  The  paper  contained  these  words : 

"National  domains — Assignat  of  one  hundred  francs,"  &c. 
Now,  what  was  the  meaning  of  the  term  one  hundred  francs  ?  What 
value  did  they  convey  the  notion  of?  Was  it  the  value  of  the  quan- 
lity  of  silver,  heretofore  known  under  the  designation  of  one  hundred 

francs?  No;  for  100/r.  could  not  possibly  be  obtained  with  an 
•issignat  to  that  amount.  Did  it  convey  the  idea  of  as  much  land, 
as  might  be  purchased  for  100  /?•.  in  silver?  Certainly  not;  for  that 


CHAP.  XXII.  ON  PRODUCTION.  283 

quantity  of  land  could  no  more  be  obtained,  even  from  the  govern- 
ment, by  an  assignat  of  100  fr.  than  100/r.  in  specie.  The  domains 
were  disposed  of  at  public  auction  for  as  many  assignats  as  they 
would  fetch;  and  the  value  of  this  paper  had  latterly  so  far  declined, 
that  one  of  100  fr.  would  not  buy  an  inch  square  of  land. 

In  short,  setting  aside  all  consideration  of  the  discredit  attached  to 
that  government,  the  sum  expressed  in  an  assignat  presented  the 
idea  of  no  definite  value  whatever ;  and  those  securities  could  not  but 
have  fallen  to  nothing,  even  had  the  government  inspired  all  the  con- 
fidence, of  which  it  was  so  eminently  destitute.  The  error  was  dis- 
covered in  the  end,  when  it  was  impossible  any  longer  to  purchase 
the  most  trifling  article  with  any  sum  of  assignats,  whatever  might 
De  its  amount.  The  next  measure  was  to  issue  mandats,  that  is  to 
say,  papers  purporting  to  be  an  order  for  the  absolute  transfer  of  the 
specific  portion  of  the  national  domains  expressed  in  the  mandat: 
but,  besides  that  it  was  then  too  late,  the  operation  was  infamously 
executed 


BOOK    II. 


CHAPTER  L 

OF  THE  BASIS  OF  VALUE ;  AND  OF  SUPPLY  AND  DEMAND. 

THE  principal  phenomena  of  production  have  been  investigated 
>n  the  first  book;  wherein  I  have  shown  how  human  industry,  with 
.he  aid  of  capital  and  of  natural  agents  and  properties,  creates  every 
kind  of  utility,  which  is  the  primary  source  of  value ;  and  in  what 
way  social  institutions  and  public  authority  operate  to  the  benefit  or 
the  prejudice  of  production.  This  second  book  will  be  devoted  to 
the  consideration  of  the  distribution  of  wealth :  to  which  end  it  will 
be  necessary,  first,  to  analyze  the  nature  of  value,  the  object  of  dis- 
tribution ;  secondly,  to  a'scertain  the  laws,  which  regulate  the  dis- 
tribution of  value,  when  once  created  amongst  the  various  members 
of  society,  so  as  to  constitute  individual  revenue. 

The  valuation  of  an  object  is  nothing  more  or  less  than  the  affirma- 
tion, that  it  is  in  a  certain  degree  of  comparative  estimation  with  some 
other  specified  object ;  and  any  ot\ier  object  possessed  of  value  may 
serve  as  the  point  of  comparison.  A  house,  for  instance,  may  be 
valued  in  corn  or  in  money.  To  say  that  it  is  worth  4000  dollars 
conveys  a  more  accurate  notion  of  its  value,  than  to  say  that  it  is 
worth  4000  bushels  of  wheat,  solely  because  the  habit  of  reckoning 
the  value  of  all  commodities  in  coin  makes  it  easier  for  the  mind  to 
form  an  idea  of  the  value  of  4000  dollars  in  other  commodities,  that 
is  to  say,  of  the  quantity  of  other  commodities  obtainable  for  that 
sum,  than  of  that  obtainable  for  4000  bushels  of  wheat.  Yet,  if 
wheat  be  1  dollar  a  bushel,  the  degree  of  value  expressed  by  each  is 
the  same. 

In  every  act  of  valuation,  the  object  valued  is  the  fixed  datum. 
In  the  instance  first  given,  the  house  is  the  datum :  it  is  a  definite 
amount  of  materials,  put  together  in  a  definite  manner,  upon  a  defi- 
nite site.  But  the  point  of  comparison  is  variable  in  amount,  ac- 
cording to  the  degree  of  estimation  in  the  mind  of  the  valuer.  If 
valued  at  4000  dollars,  the  house  is  reckoned  to  be  equivalent  to  so 
many  pieces  of  silver  coin  of  the  weight  of  416  grains,  with  a  mix- 


CHAP.  I.  ON  DISTRIBUTION.  285 

ture  of  179-1664  parts  of  alloy;  if  at  4500  dollars,  or  3500  dollars, 
it  is  but  a  variation  of  the  quantity  of  the  commodity,  that  is  the 
specific  point  of  comparison.  So  likewise,  if  that  point  be  wheat,  the 
variable  quantity  of  that  commodity  would  express  the  degree  of  value. 

Valuation  is  vague  and  arbitrary,  when  there  is  no  assurance  that 
it  will  be  generally  acquiesced  in  by  others.  The  owner  of  the 
house  may  reckon  it  worth  4500  dollars,  while  an  indifferent  per- 
son would  value  it  at  no  more  than  3500  dollars,  and  probably  nei- 
ther would  be  right.  But  if  another,  or  a  dozen  other  persons  be 
willing  to  give  for  it  a  specific  amount  of  other  commodities,  say 
4000  dollars,  or  4000  bushels  of  wheat,  we  may  conclude  the  esti- 
mate to  be  a  correct  one.  A  house  that  will  fetch  4000  dollars  in 
the  market  is  worth  that  sum.*  But  if  one  bidder  only  will  give 
that  price,  and  he  is  unable  to  re-sell  it  without  loss,  he  will  give 
more  than  it  is  worth.  The  only  fair  criterion  of  the  value  of  an 
object  is,  the  quantity  of  other  commodities  at  large,  that  can  be 
readily  obtained  for  it  in  exchange,  whenever  the  owner  wishes  to 
part  with  it;  and  this,  in  all  commercial  dealings,  and  in  all  money 
valuations,  is  called  the  current  price.^ 

What  is  it,  then,  that  determines  this  current  price  of  commodities  ? 

The  want  or  desire  of  any  particular  object  depends  upon  the 
physical  and  moral  constitution  of  man,  the  climate  he  may  live  in, 
the  laws,  customs,  and  manners  of  the  particular  society,  in  which 
he  may  happen  to  be  enrolled.  He  has  wants,  both  corporeal  and 
intellectual,  social  and  individual ;  wants  for  himself  and  for  his 
family.  His  bear-skin  and  reindeer  are  articles  of  the  first  necessity 
to  the  Laplander;  whilst  their  very  name  is  unknown  to  the  lazzn- 
rone  of  Naples,  who  cares  for  nothing  in  the  world  if  he  get  but  his 
meal  of  macaroni.  In  Europe,  courts  of  justice  are  considered  in- 
dispensable to  the  maintenance  of  social  union;  whereas  the  Indian 
of  America,  the  Tartar,  and  the  Arab,  feel  no  want  of  such  establish- 
ments. It  is  not  our  business  here  to  inquire,  wherein  these  wants 
originate ;  we  must  take  them  as  existing  data,  and  reason  upon 
them  accordingly. 

*  My  brother,  Louis  Say,  of  Nantes,  has  attacked  this  position  in  a  short  tract 
entitled,  Principales  Causes  de  la  Richesse  et  de  la  Misere  des  Peuples  et  des 
Particuliers,  8vo.  Paris.  Deterville.  He  lays  down  the  maxim,  that  objects  are 
items  of  wealth,  solely  in  respect  of  their  actual  utility,  and  not  of  their  admitted 
or  recognised  utility.  In  the  eye  of  reason,  his  position  is  certainly  correct;  but 
in  this  science  relative  value  is  the  only  guide.  Unless  the  degree  of  utility  be 
measured  by  the  scale  of  comparison,  it  is  left  quite  indefinite  and  vague,  and, 
even  at  the  same  time  and  place,  at  the  mercy  of  individual  caprice.  The  nosi- 
tive  nature  of  value  was  to  be  established,  before  political  economy  could  pre- 
tend to  the  character  of  a  science,  whose  province  it  is  to  investigate  its  origin, 
and  the  consequences  of  its  existence. 

f  In  the  earlier  editions  of  this  work,  I  had  described  the  measure  of  value 
to  be  the  value  of  the  other  product,  that  was  the  point  of  comparison,  which 
was  incorrect.  The  quantity  and  not  the  value  of  that  other  product,  is  the  mea- 
sure of  value  in  the  object  of  valuation.  This  mistake  gave  rise  to  mucn  ambi- 
guity of  demonstration,  which  the  severity  of  criticism,  both  fair  and  unfair,  lion 
taught  me  to  correct.  Fas  est  et  ab  hoste  doceri. 


286  ON  DISTRIBUTION.  BOOK  II. 

Of  these  wants,  some  are  satisfied  by  the  gratuitous  agency  ol 
natural  objects;  as  of  air,  water,  or  solar  light.  These  may  be  deno 
minated  natural  wealth,  because  they  are  the  spontaneous  offering 
of  nature ;  and,  as  such,  mankind  is  not  called  upon  to  earn  them  by 
any  sacrifice  or  exertion  whatever ;  for  which  reason,  they  are  never 
possessed  of  exchangeable  value.  Other  wants  there  are,  that  can 
only  be  satisfied  by  the  employment  of  objects  possessed  of  an 
utility,  which  they  could  not  have  been  invested  with  without  some 
modification  by  human  agency, — without  having  undergone  some 
change  of  condition,  and  without  some  difficulty  having  been  sur- 
mounted for  the  purpose.  Of  this  kind  are  the  products  of  agricul- 
ture, commerce,  and  manufacture,  in  all  their  infinite  ramifications. 
To  them  alone  is  any  value  attached;  and  for  a  very  obvious  reason; 
because  the  very  act  of  production  implies  an  act  of  mutual  exchange, 
in  which  the  producer  has  given  his  personal  agency  for  the  product 
obtained  by  its  exertion.  Wherefore,  he  will  hardly  resign  it  with- 
out receiving  what  is,  in  his  estimation,  an  equivalent.  These  may 
be  called  social  wealth,  both  because  an  act  of  exchange  is  in  itself 
a  social  act,  and  because  exclusive  property  in  the  product  obtained 
by  personal  exertion,  or  by  an  act  of  exchange,  can  only  be  secured 
by  social  institutions.  Social  wealth,  it  is  to  be  observed,  is  the  only 
part  of  human  wealth,  that  can  form  the  subject  of  scientific  research. 
1.  Because  it  is  the  only  part  that  is  the  object  of  human  estimation, 
or  at  least  of  such  estimation,  as  is  not  altogether  arbitrary  and  men- 
tal. 2.  Because  it  is  the  only  one  which  is  created,  distributed,  and 
destroyed,  according  to  any  rules  that  can  be  assigned  by  human 
science. 

The  knowledge  of  the  ground-work  of  the  quality,  value,  or 
rather  exchangeable  value,  leads  to  the  perception  of  its  origin. 
The  items  of  social  wealth  are  invested  with  value  by  the  necessity 
of  giving  something  to  obtain  them ;  and  that  something  is  produc- 
tive exertion.  When  once  obtained,  when  this  sacrifice  has  been 
made  in  the  attainment,  the  party  is  really  more  wealthy ;  he  has 
wherewithal  to  satisfy  more  wants ;  and,  if  the  object  obtained  by 
this  sacrifice  be  unsuited  to  the  personal  wants  of  the  owner,  he  may 
make  use  of  it  for  the  attainment  of  some  object  of  personal  desire, 
by  the  way  of  exchange  for  some  other  product ;  which  other  pro- 
duct will  itself  be  the  result  of  similar  productive  exertion ;  so  that, 
in  fact,  the  exchange  will  be  a  mere  mutual  transfer  of  the  productive 
exertion  on  either  side,  whereof  the  two  products  respectively  are 
the  result.  When  a  bushel  of  wheat  is  given  for  seven  pounds  of 
coffee,  there  is  a  mere  transfer  of  the  productive  agency  exerted  in 
creating  the  one,  for  that  exerted  in  the  creation  of  the  other.* 

*  It  is  scarcely  necessary  to  mention,  that  when  commodities  are  exchanged, 
.tot  for  one  another,  but  for  money,  the  case  is  nowise  varied.  No  seller  ever 
lakes  money  for  his  own  consumption,  or  for  any  other  purpose,  than  as  an  object 
of  a  second  exchange ;  so  that,  in  reality,  the  product  sold  is  exchanged  for  the 
product  bought  with  the  price.  When  a  bushel  of  wheat  has  been  sold  for 
dollar,  and  7  Ibe.  of  coffee  bought  with  that  dollar,  the  wheat  has  .actually  been 


CHAT.  I.  ON  DISTRIBUTION.  287 

Wherefore,  there  is  a  current  value  or  price  established  for  pro- 
ductive service  as  well  as  for  products.  For,  if  the  agency  exerted 
in  the  creation  of  a  bushel  of  wheat  can  obtain,  as  its  reward,  in  the 
way  of  exchange,  either  a  bushel  of  wheat  or  seven  pounds  of  coffee 
indifferently,  what  is  there  to  prevent  its  obtaining  in  the  same  way 
any  other  equivalent  product,  say  a  yard  of  cotton  cloth,  5  yards  of 
ribbon,  a  dozen  plates,  or  any  thing  else?  Should  the  bushel  of 
wheat  be  exchangeable  for  a  less  amount  of  any  of  these  commodi- 
ties respectively,  the  productive  agency  exerted  in  the  creation  of 
wheat  would  be  proportionately  less  rewarded,  than  that  exerted  in 
the  creation  of  the  specific  commodity ;  and  a  portion  of  the  former 
would  be  attracted  to  the  latter  branch  of  production,  until  the 
recompense  of  labour  in  each  department  should  find  its  fair  level. 

Each  class  of  productive  agency  has  a  current  price  peculiar  to 
itself.  •"  If  the  productive  agency  exerted  in  the  production  of  a 
bushel  of  wheat  can  obtain  for  itself  but  1-15  of  its  own  product,  it 
will  be  entitled  to  no  more  than  1-15  of  the  value  of  any  other  pro- 
duct obtainable  by  exchange  for  that  quantity  of  wheat;  for  instance 
to  1-15  of  a  dollar:  and  so  of  other  products. 

Thus  it  is  obvious,  that  the  current  value  of  productive  exertion 
is  founded  upon  the  value  of  an  infinity  of  products  compared  one 
with  another  ;*  that  the  value  of  products  is  not  founded  upon  that  of 
productive  agency,  as  some  authors  have  erroneously  affirmed  ;f  and 
that  since  the  desire  of  an  object,  and  consequently  its  value,  origin- 
ates in  its  utility,  it  is  the  ability  to  create  the  utility  wherein  ori- 
ginates that  desire,  that  gives  value  to  productive  agency ;  which 
value  is  proportionate  to  the  importance  of  its  co-operation  in  the 
business  of  production,  and  forms,  in  respect  to  each  product  indivi- 
dually, what  is  called,  the  cost  of  its  production. 

The  utility  of  a  product  is  not  confined  to  one  human  being,  but 
applies  to  a  whole  class  of  society  at  the  least,  as  in  the  case  of  parti- 
cular articles  of  clothing;  or  to  a  whole  community,  as  in  that  of 
most  of  the  articles  of  food  that  are  adapted  to  human  consumption 
in  general,  without  distinction  of  sex  or  age.  For  this  reason,  the 
demand  for  a  specific  object,  or  product,  or  act  of  productive  exer- 
tion, has  a  certain  degree  of  extent.  The  aggregate  demand  for  sugar 
in  France  is  said  to  exceed  500,000  quintals  per  annum.  Even  the 
individual  demand  of  a  specific  product  for  individual  consumption 
may  be  more  or  less  urgent.  Whatever  be  its  intensity,  it  may  be 

bartered  for  the  coffee,  and  the  money  that  has  intervened  has  withdrawn  itself 
as  completely,  as  if  it  had  never  appeared  at  all  in  the  transaction.  Wherefore 
it  is  quite  correct  to  say,  that  relative  value  is  determined  by  the  relation  of  com- 
modities one  to  another,  and  not  solely  by  that  of  each  commodity  to  money. 

*  It  must  not  be  inferred  from  this  passage,  that  I  mean  to  say,  that  the  pro- 
ductive agency  exerted  in  raising  a  product,  whose  charges  of  production  have 
amounted  to  a  dollar,  although  it  is  saleable  for  75  cents  only,  is  therefore  worto 
but  75  cents.  My  position  merely  implies,  that  this  amount  of  productive  ser- 
vice has,  in  such  case,  raised  a  value  of  75  cents  only,  though  it  might  have 
raised  a  value  of  a  dollar. 

f  Ricardo,  Prin.  Pol.  Econ.  and  Taxation, 


288  ON  DISTRIBUTION.  BOOK  11 

called  by  the  general  name  of  demand;  and  the  quantity  attainable 
at  a  given  time,  and  ready  for  the  satisfaction  of  those  who  are  in 
want°  of  the  specific  article,  may  be  called  the  supply  or  amount  in 
circulation. 

But  this  must  be  understood  with  some  limitation ;  for  there  is  no 
object  of  pleasure  or  utility,  whereof  the  mere  desire  may  not  be 
unlimited,  since  every  body  is  always  ready  to  receive  whatever  can 
contribute  to  his  benefit  or  gratification.  There  must,  therefore,  be 
some  bounds  to  demand;  and  the  most  effectual  limitation  is,  the 
ability  to  give  some  other  equivalent  product  for  the  object  of  desire. 
All  the  porters  in  a.  commercial  city  might  desire  to  have  a  coach 
and  six  for  the  more  comfortable  execution  of  their  business,  without 
raising  the  price  of  horses  and  carriages  a  tittle.  The  objects,  which 
each  individual  has  to  give  as  an  equivalent  for  the  object  of  his 
desire,  are  no  other  than  the  products  of  his  own  productive  means, 
•which  are  limited  even  in  the  case  of  the  most  wealthy  member  of 
society. 

WeaM  is,  in  all  countries,  distributed  in  every  degree  of  grada- 
tion, from  the  populous  level  of  mediocrity  to  the  solitary  pinnacle 
of  extreme  affluence.  Accordingly,  the  products  most  generally 
desirable  are  really  demanded  by  a  limited  number  only,  because 
they  alone  have  wherewithal  to  obtain  them ;  and  even  their  ability 
may  be  more  or  less  according  to  circumstances.  Whence  it  may 
be  further  concluded,  that  the  same  product  or  products  may  be  in 
greater  demand  at  a  lower  scale  of  price,  and  when  attainable  by  less 
productive  exertion,  although  nowise  increased  in  utility,  merely 
because  accessible  to  a  greater  number  of  consumers;  and,  on  the 
contrary,  less  in  demand  at  a  higher  scale  of  price,  because  accessible 
to  a  smaller  number. 

Suppose  that,  in  a  severe  winter,  a  method  should  be  hit  upon  of 
manufacturing  knit-waistcoats  of  woo\|enat2  dollars  each;  probably 
all  who  should  have  2  dollars  left,  after  satisfying  more  urgent  wants, 
would  provide  themselves  with  these  waistcoats ;  but  those  who 
should  have  but  a  dollar  and  a  half  left  must  still  go  without.  If  the 
same  article  could  be  produced  at  one  dollar  and  a  half,  these  latter 
also  might  all  be  provided  and  become  consumers;  and  the  consump- 
tion would  be  still  further  extended,  if  they  should  be  produced  at 
one  dollar  only.  In  this  manner,  products  formerly  within  reach  of 
the  rich  alone  have  been  made  accessible  to  almost  every  class  of 
society,  as  in  the  case  of  stockings. 

When  a  product  is  raised  in  price,  whether  by  taxation  or  other- 
wise howsoever,  the  contrary  effect  is  experienced;  the  number  of 
its  consumers  is  reduced  ;  for  it  can  only  be  obtained  by  such  as  can 
afford  to  pay  for  it;  and  the  ability  to  purchase  is  not  increased  by 
trie  same  causes,  that  operate  to  raise  the  price.  Thus,  in  England, 
the  great  majority  of  the  population  is  wholly  precluded  from  the 
consumption  of  vinous  liquors,  and  of  many  other  articles;  for  their 
attainment  involves  so  large  a  sacrifice  of  products,  or  of  productive 
agency,  that  those  only  can  attempt  it,  who  have  a  great  deal  of 


CHAP.  L  ON  DISTRIBUTION.  289 

either  to  spare.  In  such  cases,  not  only  is  the  number  of  consumers 
diminished,  but  the  consumption  of  each  consumer  is  reduced  also. 
Though  a  consumer  of  coffee  may  not  be  compelled,  by  a  rise  of  its 
price,  to  relinquish  that  beverage  altogether,  he  must  at  all  events 
curtail  the  amount  of  his  consumption ;  which  is  then  like  that  of 
two  individuals,  of  whom  one  discontinues,  and  the  other  remains 
able  and  willing  to  continue  the  use  of  the  article. 

In  commercial  speculation,  as  the  purchaser  does  not  buy  for  his 
own  consumption,  he  proportions  his  purchases  to  what  he  expects 
to  sell.  Since,  then,  the  quantity  he  can  sell  depends  upon  the 
price  he  can  afford  to  sell  at,  he  will  buy  less  according  as  the  price 
rises,  and  more  according  as  it  falls. 

In  poor  countries,  objects  of  even  the  commonest  use,  and  of  infe- 
rior price,  frequently  exceed  the  means  of  a  great  proportion  of  the 
population.  There  are  countries,  where  shoes,  though  cheap,  are 
oui  of  teach  of  most  of  the  inhabitants.  The  price  of  this  commo- 
dity does  not  fall  to  a  level  with  the  means  of  the  people ;  because 
that  level  is  siili  bolcv  the  bare  cost  of  production.  But,  shoes  of 
leather  not  being  absolutely  necessary  to  existence,  those  who  are 
unable  to  procure  these,  wear  wooden  shoes,  (sabots)  or  go  barefoot. 
When  this  is  unhappily  the  case  with  an  article  of  primary  neces- 
sity, part  of  the  population  must  perish,  or  at  least  cease  to  be 
renewed.  These  are  the  causes  of  a  general  nature,  that  limit  the 
demand  for  each  product,  and  for  all  products  in  general. 

In  respect  to  supply,  it  consists  of  l.he  whole  of  any  commodity 
which  the  owners  for  the  time  being  <rre  disposed  to  part  with  for 
an  equivalent,  in  other  words,  to  sell  at  the  current  rate,  and  not 
merely  of  what  is  actually  on  sale  at  the  time.  The  whole  of  this  is 
also  called  the  circulating  or  floating  stock.  Yet,  strictly  speaking, 
no  commodity  is  in  circulation,  except  during  the  act  of  transit  from 
the  seller  to  the  purchaser,  which  is  almost  instantaneous.  But  the 
bare  act  of  transit  has  no  influence  on  the  terms  of  the  bargain,'  to 
which  it  is  commonly  subsequent;  it  is  a  mere  matter  of  executive 
detail.  The  point  of  real  importance  is,  the  inclination  of  the 
owner  to  part  with  the  object  of  property.  A  commodity  is  in  cir- 
culation, whenever  it  is  in  quest  of  a  purchaser,  which  it  may  be  in 
the  most  urgent  need  of,  without  altering  its  locality  in  the  least. 
Thus,  the  stock  in  a  shop  or  warehouse  is  in  circulation;  thus  too, 
lands,  rent-charges,  houses,  and  the  like,  are  said  to  be  in  circulation, 
and  the  expression  is  intelligible  enough.  Even  industry  is  some- 
times in  circulation  and  sometimes  not,  according  as  it  is  either  in 
quest  of  employment,  or  already  employed. 

For  the  same  reason,  an  object  ceases  to  be  in  circulation,  me 
moment  it  is  set  apart,  either  for  consumption  or  for  export  to  an- 
other market,  or  accidentally  destroyed,  or  withdrawn  by  the  ca- 
price of  its  owner,  or  held  back  at  a  price,  which  amounts  to  a 
refusal  to  sell. 

Inasmuch  as  supply  consists  of  those  commodities  only,  wnicn 
are  to  be  had  at  the  current  price  or  ordinary  rate  of  the  market,  a 
I  25  2  M 


290  ON  DISTRIBUTION.  BOOK  II, 

commodity  raised  by  the  cost  of  production  above  that  level,  will 
cease  to  be  produced,  or  to  form  part  of  the  supply.  Wherefore, 
the  supply  will  be  more  abundant,  when  the  current  price  is  high, 
and  more  scanty  when  that  price  has  declined. 

Besides  these  universal  and  permanent  limitations  of  supply  and 
demand,  there  are  others  of  a  casual  and  transient  nature,  which 
always  operate  concurrently  with  the  former. 

The  prospect  of  an  abundant  vintage  will  lower  the  price  of  all 
the  wine  on  hand,  even  before  a  single  pipe  of  the  expected  vintage 
has  been  brought  to  market ;  for  the  supply  is  brisker,  and  the  sale 
duller,  in  consequence  of  the  anticipation.  The  dealers  are  anxious 
to  dispose  of  their  stock  in  hand,  in  fear  of  the  competition  of  the 
new  vintage ;  while  the  consumers,  on  the  other  hand,  retard  their 
fresh  purchases,  in  the  expectation  of  gaining  in  price  by  the  delay. 
A  large  arrival  and  immediate  sale  of  foreign  articles  all  at  once, 
lowers  their  price,  by  the  relative  excess  of  supply  above  demand. 
On  the  contrary,  the  expectation  of  a  bad  vintage,  or  the  loss  of 
many  cargoes  on  the  voyage,  will  raise  prices  above  the  cost  of 
production. 

Moreover,  there  are  some  particular  products,  which  nature  or 
human  institutions  have  subjected  to  monopoly,  and  thus  prevented 
from  being  supplied  in  equal  abundance  with  those  of  a  similar  de- 
scription. Of  this  kind  are  the  wines  of  particular  and  celebrated 
vineyards,  the  soil  of  which  cannot  be  extended  by  the  extended 
demand.  So  the  postage  of  letters  is,  in  most  countries,  charged  at 
a  monopoly-price.  _ 

Finally,  whatever  be  the  general  or  particular  causes,  that  operate 
to  determine  the  relative  intensity  of  supply  and  demand,  it  is  that 
intensity,  which  is  the  ground-work  of  price  on  every  act  of  ex- 
change; for  price,  it  will  be  remembered,  is  merely  the  current 
value  estimated  in  money.  The  demand  for  all  objects  of  pleasure, 
or  utility,  would  be  unlimited,  did  not  the  difficulty  of  attainment, 
or  price,  limit  and  circumscribe  the  supply.  On  the  other  hand, 
the  supply  would  be  infinite,  were  it  not  restricted  by  the  same  cir- 
cumstance, the  price,  or  difficulty  of  attainment:  for  there  can  be  no 
doubt,  that  whatever  is  producible  would  then  be  produced  in  un- 
limited quantity,  so  long  as  it  could  find  purchasers  at  any  price  at 
all.  Demand  and  supply  are  the  opposite  extremes  of  the  beam, 
whence  depend  the  scales  of  dearness  and  cheapness ;  the  price  is 
the  point  of  equilibrium,  where  the  momentum  of  the  one  ceases, 
and  that  of  the  other  begins. 

This  is  the  meaning  of  the  assertion,  that,  at  a  given  time  and 
place,  the  price  of  a  commodity  rises  in  proportion  to  the  increase 
of  the  demand  and  the  decrease  of  the  supply,  and  vice  versa ;  or  in 
other  words,  that  the  rise  of  price  is  in  direct  ratio  to  the  demand, 
and  inverse  ratio  to  the  supplv. 

The  utility  of  an  object,  or,  what  is  the  same  thing,  the  desire  to 
«'»btain  jt,  may  possibly  be  unable  to  raise  its  price  to  a  level  with  its 
<-ost  of  production.  In  this  case  it  is  not  produced,  because  its  pro- 


CHAP.  I.  ON  DISTRIBUTION.  291 

duction  would  cost  more  than  the  product  would  be  worth.  Pro- 
bably the  price  that  caviar*  would  fetch  at  Paris  would  hardly 
equal  the  charge  of  producing  it  there ;  for  it  is  so  little  in  request 
there,  that  it  scarcely  would  bring  the  lowest  price  that  it  could  be 
procured  for,  and  consequently  it  is  riot  produced;  but  elsewhere,  it 
is  both  produced  and  consumed  in  great  quantities. 

When  the  price  of  any  object  is  legally  fixed  below  the  charges  of 
its  production,  the  production  of  it  is  discontinued,  because  nobody 
is  willing  to  labour  for  a  loss :  those,  who  before  earned  their  liveli- 
hood by  this  branch  of  production,  must  die  of  hunger,  if  they  find 
no  other  employment;  and  those,  who  could  have  purchased  the 
product  at  its  natural  price,  are  obliged  to  go  without  it.  The 
establishment  of  the  fixed  rate,  or  maximum,  is  a  suppression  of  a 
portion  of  production  and  consumption ;  that  is  to  say,  a  diminution 
of  the  prosperity  of  the  community,  which  consists  in  production 
and  consumption.  Even  the  produce  already  existing  is  not  so  pro- 
perly consumed  as  it  should  be.  For,  in  the  first  place,  the  pro- 
prietor withholds  it  as  much  as  possible  from  the  market  In  the 
next,  it  passes  into  the  hands,  not  of  those  who  want  it  most,  but  of 
those  who  have  most  avidity,  cunning,  and  dishonesty;  and  often 
with  the  most  flagrant  disregard  of  natural  equity  and  humanity.  A 
scarcity  of  corn  occurs ;  the  price  rises  in  consequence;  yet  still  it  is 
possible,  that  the  labourer,  by  redoubling  his  exertions,  or  by  an  in- 
crease of  wages,  may  earn  wherewithal  to  buy  it  at  the  market 
price.  In  the  mean  time,  the  magistrate  fixes  corn  at  half  its  natural 
price:  what  is  the  consequence?  Another  consumer,  who  had  al- 
ready provided  himself,  and  consequently  would  have  bought  no 
more  corn  had  it  remained  at  its  natural  price,  gets  the  start  of  the 
labourer,  and  now,  from  mere  superfluous  precaution,  and  to  take 
advantage  of  the  forced  cheapness,  adds  to  his  own  store  that  por 
tion,  which  should  have  gone  to  the  labourer.  The  one  has  a  dou- 
ble provision,  the  other  none  at  all.  The  sale  is  no  longer  regulated ' 
by  the  wants  and  means,  but  by  the  superior  activity  of  the  pur- 
chasers. It  is,  therefore,  not  surprising,  that  a  maximum  of  price 
on  commodities  should  aggravate  their  scarcity. 

A  law,  that  simply  fixes  the  price  of  commodities  at  the  rate  the^ 
would  naturally  obtain,  is  merely  nugatory,  or  serves  only  to  alarm 
producers  and  consumers,  and  consequently  to  derange  the  natural 
proportion  between  the  production  and  the  demand ;  which  propor- 
tion, if  left  to  itself,  is  invariably  established  in  the  manner  most 
favourable  to  both. 

Hope,  fear,  malevolence,  benevolence,  in  short,  every  human  pats 
sion  or  virtue  may  influence  the  scale  of  price.  But  it  is  the  pro- 
vince of  moral  science  to  estimate  the  intensity  of  their  effect  upon 
actual  price  in  every  instance,  which  is  the  only  thing  we  are  here 
to  attend  to.  Neither  need  we  advert  to  the  operation  of  tne  causes 
of  a  nature  purely  political,  that  may  operate  to  raise  the  price  of  a 

*  A  pickle  made  of  the  roe  of  sturgeons,  a  favourite  condiment  of  Russian  diet 


292  ON  DISTRIBUTION.  BOOK  D 

product  above  the  degree  of  its  real  utility.  For  these  are  of  the 
same  class  with  actual  robbery  and  spoliation,  which  come  under  the 
department  of  criminal  jurisprudence,  although  they  may  intrude 
themselves  into  the  business  of  the  distribution  of  wealth.  The 
functions  of  national  government,  which  is  a  class  of  industry,  whose 
result  or  product  is  consumed  by  the  governed  as  fast  as  it  is  pro- 
duced, may  be  too  dearly  paid  for,  when  they  get  into  the  hands  of 
usurpation  and  tyranny,  and  the  people  be  compelled  to  contribute 
a  larger  sum  than  is  necessary  for  the  maintenance  of  good  govern- 
ment. This  is  a  parallel  case  to  that  of  a  producer  without  competi- 
tors, whether  he  have  got  rid  of  them  by  force,  or  by  accidental 
circumstances.  He  may  raise  his  product  to  what  price  he  will, 
even  to  the  extreme  limit  of  the  consumer's  ability,  if  his  monopoly 
be  seconded  by  authority.  But  it  is  the  province  of  the  political 
philosopher,  and  not  of  the  political  economist,  to  teach  us  how  this 
evil  may  be  avoided.  In  like  manner,  although  it  be  the  province 
of  ethics,  or  of  the  knowledge  of  the  moral  qualities  of  man,  to  teach 
the  means  of  ensuring  the  good  conduct  of  mankind,  in  their  mutual 
relations,  yet,  whenever  the  intervention  of  a  superhuman  power 
appears  necessary  to  effect  this  purpose,  those  who  assume  to  be  the 
interpreters  of  that  power  must  be  paid  for  their  service.  If  their 
labour  be  useful,  its  utility  is  an  immaterial  product,  which  has  a 
real  value ;  but,  if  mankind  be  nowise  improved  by  it,  their  labour 
riot  being  productive  of  utility,  that  portion  of  the  revenues  of  so 
ciety,  devoted  to  their  maintenance,  is  a  total  loss ;  a  sacrifice  with 
out  any  return. 

With  the  most  earnest  wish  to  confine  myself  within  my  subject 
it  is  impossible  to  avoid  sometimes  touching  upon  the  confines  ol 
policy  and  morality,  were  it  only  for  the  purpose  of  marking  out 
their  points  of  contact. 


CHAPTER  II. 

THE  SOURCES  OF  REVENUE. 


IT  has  been  shown  in  Book  L,  that,  products  are  raised  by  the 
productive  means  at  the  -command  of  mankind,  that  is  to  say,  by 
human  industry,  capital,  and  natural  powers  and  agents.  The  pro- 
ducts thus  raised,  form  the  revenue  of  those  possessed  of  these  means 
of  production,  and  enable  them  to  procure  such  of  the  necessaries 
and  comforts  of  existence,  as  are  not  furnished  gratuitously,  either 
by.  nature,  or  by  their  fellow-creatures. 

The  exclusive  right  to  dispose  of  revenue  is  a  consequence  of  tha 
»-x"lusive  right,  or  property,  in  the  means  of  production;  and  such 
ot  them,  a*  are  not  the  subject  of  human  appropriation,  are  not  either 


CHAP.  n.  ON  DISTRIBUTION.  293 

items  of  productive  means,  or  sources  of  revenue ;  they  form  no  part 
of  human  wealth,  which  implies  appropriation  and  exclusive  pos- 
session ;  for  there  is  no  such  thing  as  wealth,  unless  where  property 
is  known  and  established,  and  where  possession  is  both  acknow- 
ledged and  secured. 

The  origin  or  the  justice  of  the  right  of  property,  it  is  unnecessary 
to  investigate,  in  the  study  of  the  nature,  and  progress  of  human 
wealth.  Whether  the  actual  owner  of  the  soil,  or  the  person  from 
whom  he  derived  its  possession,  have  obtained  it  by  prior  occu- 
pancy, by  violence,  or  by  fraud,  can  make  no  difference  whatever 
in  the  business  of  the  production  and  distribution  of  its  product  or 
revenue. 

Perhaps  it  is  scarcely  necessary  to  remark,  that  property  in  that 
class  of  productive  means,  which  has  been  called  human  industry, 
and  in  that  distinguished  by  the  general  name  of  capita],  is  far  more 
sacred  and  indisputable,  than  in  the  remaining  class  of  natural 
powers  and  agents.  The  industrious  faculties  of  man,  his  intelli- 
gence, muscular  strength,  and  dexterity,  are  peculiar  to  himself  and 
inherent  in  his  nature.  And  capital,  or  accumulated  produce,  is  the 
mere  result  of  human  frugality  and  forbearance  to  exerc'se  the 
faculty  of  consuming,  which,  if  fully  exerted,  would  have  destroyed 
products  as  fast  as  they  were  created,  and  fhese  never  could  have 
been  the  existing  property  of  any  one;  wherefore,  no  one  else,  but 
he  who  has  practised  this  self-denial,  can  claim  the  result  of  it  with 
any  show  of  justice.  Frugality  is  next  of  kin  to  the  actual  creation 
of  products,  which  confers  the  most  unquestionable  of  all  titles  to 
the  property  in  them. 

These  several  sources  of  production  are  some  of  them  alienable, 
as  land,  implements  of  arts,  &c. ;  and  some  inalienable,  as  personal 
faculties.  Some  also  are  consumable,  as  are  all  the  items  of  floating 
capital ;  others,  inconsumable,  as  land.  Some,  too,  there  are,  that 
are  neither  alienable  nor  consumable,  yet  are  capable  of  destruction , 
as  the  human  faculties,  intellectual  and  corporeal,  which  vanish  with 
human  existence. 

Such  as  are  capable  of  consumption,  as,  for  instance,  the  floating 
values,  whereon  production  expends  its  energies,  may  be  consumed 
either  in  such  manner  as  to  occasion  a  re-production,  in  which  case 
they  will  still  constifute  a  part  of  the  means  of  production ;  or  in 
such  manner  as  to  yield  no  further  production,  in  which  case  they 
cease  to  form  any  part  of  those  means,  and  are  devoted  to  pure  de- 
struction, more  or  less  rapid. 

Although  revenue,  as  wrell  as  the  sources  of  production,  is  a  con- 
stituent part  of  individual  wealth,  yet  no  one  is  reputed  to  reduce 
his  fortune  by  the  consumption  of  his  revenue  only,  provided  that 
he  does  not  encroach  upon  his  productive  means ;  because  revenue 
is  a  regenerating  product,  whereas  the  means  of  production,  so  long 
as  they  continue  to  exist,  are  a  constant  and  perpetual  source  of  new 
products. 

The  current  value  of  these  appropriable  sources  of  production  is 
25* 


ON  DISTRIBUTION.  BOOK  II. 

established  on  the  same  principles,  as  that  of  all  other  objects ;  that 
is  to  say,  by  the  conflicting  influence  of  supply  and  demand.  The 
only  remark  that  need  be  made  upon  it  is,  that  the  demand  does  not 
originate  in  the  enjoyment  anticipated  from  the  immediate  use  of 
the  particular  source;  for  a  field  or  an  implement  of  trade  yields  to 
the  owner  no  direct  enjoyment,  which  is  capable  of  estimation ;  their 
value  has  reference  to  the  value  of  the  product  they  are  capable  of 
raising,  which  itself  originates  in  the  utility  of  that  product,  or  the 
satisfaction  it  may  be  capable  of  affording. 

With  regard  to  those  sources,  that  are  inalienable,  as  are  the 
human  faculties  of  mind  and  body,  they  can  never  be  the  subject  of 
actual  exchange,  and  their  value  is  a  matter  of  mere  mental  estima- 
tion, grounded  upon  the  value  they  may  be  capable  of  producing 
Thus  the  productive  means  of  this  description,  which  yield  to  an 
artisan  the  wages  of  1  dollar  a  day,  or  of  365  dollars  a  year,  may 
be  reckoned  equivalent  to  a  vested  capital  yielding  an  equal  annua* 
revenue. 

And  now  that  \ve  have  taken  this  general  and  cursory  view  of 
the  sources  of  production  and  of  revenue  in  the  abstract,  we  may 
enter  upon  a  more  minute  analysis  of  their  nature,  which  will  lead 
us  into  the  labyrinth  of  the  science  of  political  economy,  and  furnish 
us  with  a  clue  to  some  of  its  most  intricate  windings. 

The  immediate  result  of  these  sources  is  not,  strictly  speaking,  a 
product,  but  a  productive  service  that  helps  us  to  a  product.  Pro- 
ducts should,  therefore,  be  considered  as  the  result  of  an  interchange 
of  productive  service  on  the  one  hand,  and  the  actual  products  on 
the  other,  subsequently  to  which,  revenue  appears  for  the  first  time 
in  the  shape  of  products ;  and  these  again  may  be  exchanged  for 
other  products,  iijto  which  latter  form  the  same  revenue  will  then 
be  converted. 

The  conception  of  this  matter  will  be  rendered  clearer  by  a  prac- 
tical illustration.  A  piece  of  arable  land  yields  an  annual  product, 
say  of  300  bushels  of  wheat,  whereof  200  bushels  more  or  less,  may 
be  considered  as  resulting  from  the  agency  of  the  capital  and  in- 
dustry employed  in  its  cultivation,  and  the  remaining  100  bushels 
as  resulting  from  the  natural  productive  powers  of  the  soil.  The 
revenue,  yielded  by  the  land  to  the  proprietor,  will  have  appeared 
first  in  the  way  of  concurring  productive  service  afforded  by  the 
object  of  property,  the  land :  which  productive  service  will  have 
been  transferred  or  lent  to  the  cultivator  for  the  sum  of  100  bushels 
of  wheat,  and  this  will  be  the  first  act  of  exchange.  If  these  100 
bushels  of  wheat  be  converted  into  specie,  either  by  the  proprietor 
himself  or  by  the  cultivator  on  his  behalf,  and  in  consequence  of  a 
mutual  arrangement,  this  specie  will  still  be  the  same  identical 
revenue,  though  under  the  secondary  form  of  money. 

This  analysis  will  conduct  us  to  a  knowledge  of  the  real  value  of 
levenue,  which  falls  in  with  the  general  definition  of  value  given 
in  the  preceding  chapter,  namely,  the  amount  of  other  objects 
obtainable  bv  exchange  for  the  object  of  intended  transfer  What, 


CHAP.  H.  ON  DISTRIBUTION.  295 

then,  is  the  object  of  transfer,  for  which  revenue  is  given  in  ex- 
change I  why,  the  productive  service  of  those  means,  that  the  re- 
ceiver of  revenue  may  be  possessed  of.  And  what  is  obtained1  by 
the  primary  act  of  exchange,  which  we  designate  production?  why, 
products.  Wherefore,  the  value  of  revenue  is  large  in  proportion, 
not  to  the  value,  but  to  the  quantity  of  the  product  obtained,  to  the 
sum  total  of  utility  created. 

Thus  we  find,  that  the  ratio  of  national  revenue,  in  the  aggregate, 
is  determined  by  the  amount  of  the  product,  and  not  by  its  value.* 
It  is  not  so  with  individual  revenue ;  because  a  variation  in  the  rela- 
tive value  of  different  products  will  operate  to  swell  that  of  one 
individual,  or  class,  at  the  expense  of  another. 

Could  each  member  of  society  live  on  the  primary  products 
whereof  his  revenue  is  composed,  the  relative  degree  of  revenue 
would,  like  that  of  nations,  in  the  aggregate,  depend  upon  the 
amount  of  the  product,  upon  the  sum  of  utility  created,  and  not 
upon  its  exchangeable  value.  But,  in  a  state  of  society  at  all 
elevated  above  barbarism,  this  is  impossible;  each  individual 
consumes  a  much  less  quantity  of  his  own  peculiar  product,  than 
of  those  of  other  people,  which  he  buys  with  his  own.  The  grand 
point,  therefore,  of  individual  importance  to  the  producer,  is,  the 
quantity  of  product  not  of  his  own  creation,  which  he  may  be  able 
to  procure  with  his  own  productive  means,  or  with  the  products 
created  by  their  agency.  Suppose,  for  instance,  the  land,  capital, 
and  personal  faculties  of  a  particular  individual  to  be  engaged  in  the 
cultivation  of  saffron ;  as  he  will  probably  himself  consume  little  or 
no  saffron,  his  revenue  will  consist  of  such  other  objects,  as  his 
annual  crop  of  saffron  can  be  exchanged  for ;  and  the  ratio  of  that 
revenue  will  be  elevated  by  a  rise  in  the  price  of  saffron ;  while  that 
of  the  consumers  of  that  article  will  be  proportionately  reduced  to 
the  full  extent  of  the  rise  of  its  price.  On  the  contrary,  their  reve- 
nue will  be  augmented  in  like  manner  by  a  fall  of  its  price,  to  the 
prejudice  of  the  revenue  of  the  grower. 

Every  saving  in  the  charges  of  production,  that  is  to  say,  every 
saving  in  the  productive  agency  exerted  to  raise  the  same  product,  is 
an  increase  of  the  revenue  of  the  community  to  an  equal  extent;  as, 
for  example,  the  contrivance  to  raise  as  much  upon  one  acre  of  land 
as  before  upon  two,  or  to  effect  with  two  days'  labour,  what  before 
required  as  much  as  four;  for  the  productive  agency  thus  released 
may  be  directed  to  the  increase  of  production,  (a)  And  this  acces- 

*  Hence  the  futility  of  any  attempt  to  compare  the  wealth  of  different  nations, 
of  France  and  England  for  instance,  by  comparison  of  the  value  of  their  respective 
national  products.  Indeed,  two  values  are  not  capable  of  comparison,  when  placed 
at  a  distance  from  each  other.  The  only  fair  way  of  comparing  the  wealth  of 
one  nation  with  that  of  another,  is,  by  a  moral  estimate  of  the  individual  welfare 
in  each  respectively. 

(i)  And  will  be  so  for  the  most  part,  though  not  entirely,  wherever  the  mem 
tiers  of  the  community  have  no  other  hope  of  subsistence,  than  from  the  product 


.^96  ON  DISTRIBUTION.  BOOK  II. 

sion  of  revenue  will  accrue  to  the  individual  benefit  of  the  contriver, 
so  long  as  the  contrivance  can  be  confined  to  his  own  knowledge; 
but  to  that  of  consumers  at  large,  as  soon  as  the  notoriety  shall  have 
awakened  competition,  and  obliged  him  to  limit  his  profits  to  the 
actual  charges  of  production. 

However  revenue  may  be  transformed  by  the  various  acts  of 
exchange,  commencing  with  the  productive  agency,  which  is  the 
primitive  exhibition  of  revenue,  it  remains  the  same  in  substance, 
until  the  moment  of  its  ultimate  consumption.  The  revenue  yielded 
by  an  acre  of  arable  land  remains,  in  reality,  the  same,  both  after  its 
primary  exchange,  by  the  act  of  production,  into  the  form  of  wheat, 
and  after  its  secondary  transformation  into  silver  coin,  even  although 
the  wheat  have  been  consumed  by  the  purchasers.  But,  as  soon  as 
the  revenued  individual  converts  his  silver  coin  into  an  object  of 
consumption,  and  that  object  is  simply  consumed,  the  value  of  his 
revenue  thenceforth  ceases  to  exist,  and  is  destroyed  and  lost, 
although  the  silver  coin,  whose  form  it  once  assumed,  continue  in 
existence.  It  must  not  be  imagined  still  to  exist  in  the  hands  of  the 
temporary  holder  of  the  coin,  although  lost  to  the  receiver  of  reve- 
nue; but'is  equally  lost  to  mankind  at  large;  for  the  actual  holder 
of  the  coin  must  have  obtained  possession  of  it  by  the  transfer  of 
other  revenue  of  his  own,  or  of  some  source  of  revenue  before  in 
his  own  possession. 

When  revenue  is  added  to  capital,  it  thenceforth  ceases  to  be 
revenue,  or,  as  such,  to  be  capable  of  satisfying  the  wants  of  the 
proprietor;  it  can  only  yield  an  increased  revenue,  being  an  item  of 
productive  capital,  consumable  in  the  manner  of  capital,  that  is  to 
say,  in  such  way  as  to  yield  a  product  in  exchange  and  return  for 
the  value  consumed. 

When  capital  or  land,  or  personal  service,  is  let  out  to  hire,  its 
productive  power  is  transferred  to  the  renter  or  adventurer  in  pro- 
duction, in  consideration  of  a  given  amount  of  products  agreed  upon 
beforehand.  It  is  a  sort  of  speculative  bargain,  wherein  the  renter 
takes  the  risk  of  profit  and  loss,  according  as  the  revenue  he  may 
realise,  or  the  product  obtained  by  the  agency  transferred,  shall  ex- 
ceed or  fall  short  of  the  rent  or  hire  he  is  to  pay.  Yet  one  revenue 
only  can  be  realised ;  and,  though  a  borrowed  capital  may  yield  to 

of  their  own  productive  means ;  for  the  whole  surplus  of  revenue  thus  created,  is 
sure  to  go,  in  the  end,  to  the  appropriators  of  the  natural  sources  of  production ; 
leaving  those,  whose  productive  means  are  merely  personal,  to  employ  them  upon 
some  other  object,  or  upon  an  enlarged  production  of  the  same  object.  And  this 
is  a  complete  answer  to  the  position  of  Sismondi  and  Malthus,  that  economy  of 
human  productive  exertion  makes  the  multiplication  of  unproductive  consumers, 
not  only  probable,  but  necessary.  But  where  a  poor-law  or  monastic  establish- 
ment provides  for  the  subsistence  of  the  human  agency  thus  rendered  superfluous, 
there  will  probably  be  no  increase  of  national  revenue  consequent  upon  a  saving 
of  productive  agency ;  for  the  surplus  labour  is  thereby  released  from  the  neces- 
sity of  exertion  in  some  other  channel.  With  such  institutions,  the  enlargement 
•*f  productive  power  by  machinery  or  otherwise  may  be  very  great,  without  any 
enlargement  of  national  production,  revenue,  or  wealth.  T. 


CMAK  III.  ON  DISTRIBUTION.  297 

the  adventurer  an  annual  product  of  10  per  cent  instead  of  5  per 
cent,  which  he  pays  in  the  shape  of  interest,  yet  the  revenue  of  the 
capital,  the  productive  service  it  affords,  will  not  be  10  per  cent. ;  for 
in  that  gross  product  is  included  the  recompense  of  the  productive 
agency,  both  of  the  capital  and  of  the  industry  that  has  turned  it  to 
account. 

The  actual  revenue  of  each  individual  is  proportionate  to  the 
quantity  of  products  at  his  disposal,  being  either  the  immediate  fruit 
of  his  productive  means,  or  the  result  of  those  transformations  from 
its  primitive  state,  which  his  revenue  may  have  undergone,  until  it 
have  assumed  the  shape  of  the  ultimate  object  of  his  consumption. 
The  ratio  of  that  quantity,  or  of  utility  inherent  in  it,  can  only  be 
estimated  from  its  current  price  in  the  dealings  of  mankind.  In 
this  sense,  the  revenue  of  an  individual  is  equal  to  the  value  derived 
from  his  productive  means ;  which  value,  however,  is  the  greater, 
in  respect  to  the  objects  of  his  consumption,  in  proportion  to  the 
cheapness  of  those  objects,  which  augments  his  command  of  other 
than  his  own  immediate  products. 

In  like  manner,  the  revenue  of  a  nation  is  the  more  considerable, 
in  proportion  to  the  intensity  of  the  value  whereof  it  consists,  i.  e. 
of  the  value  of  its  aggregate  productive  powers,  and  to  its  high  rela- 
tive degree  to  the  value  of  the  objects  of  external  attainment.  The 
value  of  productive  agency  must  be  high,  even  where  that  of  pro- 
ducts is  low ;  for  it  should  be  always  recollected,  that,  since  the  in- 
tensity of  value  depends  upon  the  quantity  of  objects  obtainable  in 
exchange,  revenue,  or,  in  other  words,  the  agency  of  the  national 
sources  of  production,  is  large,  in  proportion  to  the  abundance  and 
cheapness  of  the  products  derived  from  them. 


CHAPTER  m. 

OP  REAL  AND  RELATIVE  VARIATION  OP  PRICE. 

THE  price  of  an  article  is  the  quantity  of  money  it  may  be  worth; 
current  price,  the  quantity  it  may  be  sure  of  obtaining  at  the  par- 
ticular place.  Its  locality  is  material,  for  the  desire  of  a  specific 
object  varies  in  relation  to  the  quantity  procurable  according  to  the 
locality. 

The  price  obtained  upon  the  sale  of  an  article  represents  all  other 
articles  procurable  with  that  price.    To  say,  that  the  price  of  an  ell 
of  broad-cloth  is  8  dollars,  implies,  that  it  is  exchangeable  either  for 
so  much  coined  silver,  or  for  so  much  of  any  other  product  or  pro- 
ducts as  may  be  procurable  with  that  sum.   Money-price  is  selected 
for  the  purposes  of  an  illustration,  in  preference  to  price  in  com 
modities  at  large,  merely  for  greater  simplicity ;  but  the  real  and  ulti 
mate  object  of  exchange  is,  not  money,  but  commodities. 

2N 


298  ON  DISTRIBUTION.  BOOK  IL 

Price,  in  this  sense,  may  be  divided  into  buying  price  and  selling 
price ;  that  is  to  say,  the  price  given  to  obtain  possession  of  an  object, 
and  the  price  obtainable  for  the  relinquishment  of  its  possession. 

The  price  paid  for  every  product,  at  the  time  of  its  original  attain- 
ment or- creation,  is,  the  charge  of  the  productive  agency  exerted, 
or  the  cost  of  its  production.*  Tracing  upwards  to  this  original 
price  of  a  product,  we  unavoidably  come  to  other  products ;  for  the 
charge  of  productive  agency  can  only  have  been  defrayed  by  other 
products.  The  daily  wages  of  the  weaver  engaged  in  producing 
broad-cloth  are  products;  they  consist  either  of  the  articles  of  his 
dailv  subsistence,  or  of  the  money  wherewith  he  may  procure  them, 
both  which  are  equally  products.  Wherefore  the  production,  as 
well  as  the  subsequent  interchange  of  products,  may  be  said  to  re- 
solve itself  into  a  barter  of  one  product  for  another,  conducted  upon 
a  comparison  of  their  respective  current  prices.  But  there  is  one 
important  particular,  that  requires  the  most  assiduous  attention,  the 
neglect  or  oversight  of  which  has  led  to  abundance  of  error  and 
misrepresentation,  and  has  made  the  works  of  many  writers  calcu- 
lated only  to  mislead  the  students  in  this  science. 

An  ell  of  broad-cloth,  that  has,  in  the  production,  required  the 
purchase  of  productive  agency  at  the  price  of  8  dollars,  will  have 
cost  that  sum  in  the  manufacture;  but  if  three-fourths  only  of  that 
productive  agency  can  be  made  to  suffice  for  its  production ;  if,  sup- 
posing one  kind  of  productive  agency  only  to  be  requisite,  15  in- 
stead of  20  days'  labour  of  a  single  workman  be  enabled  to  complete 
the  product,  the  same  ell  of  broad-cloth  will  cost  6  dollars  to  the 
producer,  at  the  same  rate  of  wages.  In  this  case  the  current  price 
of  human  productive  agency  will  have  remained  the  same,  although 
the  cost  of  production  will  have  varied  in  the  ratio  of  the  difference 
between  6  dollars  and  8  dollars.  But,  as  this  difference  in  the  rela- 
tion between  the  cost  of  production  and  the  current  price  of  the 
product  holds  out  a  prospect  of  larger  profit  than  ordinary  in  this 
particular  channel,  it  naturally  attracts  a  larger  proportion  of  pro- 
ductive agency,  the  exertion  of  which,  by  enlarging  the  supply, 
reduces  again  the  current  price  to  a  level  with  the  bare  cost  of  pro- 
duction.f 

This  kind  of  variation  in  the  price  of  a  product  I  shall  call  real 
variation  of  price,  because  it  is  a  positive  variation,  involving  no 
equivalent  variation  in  the  object  of  exchange,  and  both  may,  and 
actually  does  occur,  without  any  cotemporaneous  variation  of  the 
price,  either  of  productive  agency,  of  the  products  wherewith  it  is 
recompensed,  or  of  those,  for  which  the  specific  object  of  this  real 
variation  is  procurable. 
—  -  — — . 1 

*  Vide  Wealth  of  Nations,  book  i.  c.  5. 

'  The  cost  of  production  is  what  Smith  calls  the  natural  price  of  products,  as 
contrasted  with  their  current  or  market  price,  as  he  terms  it.  But  it  results  from 
what  has  been  said  above,  that  every  act  of  barter  or  exchange,  among  the  rest 
oven  that  implied  in  the  act  of  production,  is  conducted  with  reference  to  current 
price 


CHAP.  III.  ON  DISTRIBUTION.  299 

It  is  otherwise  with  regard  to  the  variation  of  price  of  products 
already  in  existence  one  to  another,  without  reference  to  their  re- 
spective cost  of  production.  When  the  wine  of  the  last  vintage 
that  a  month  before  sold  at  40  dollars  the  tun,  will  fetch  no  more 
than  30  dollars,  money  and  all  other  objects  of  desire  to  the  wine- 
vender  have  actually  advanced  in  price  to  him ;  for  the  productive 
agency  exerted  in  raising  the  wine,  receives  a  recompense  of  but  30 
dollars,  instead  of  40  dollars  in  money,  and  of  commodities  in  a  like 
oroportion,  which  is  an  abatement  of  £ ;  whereas,  in  the  instance 
above  cited,  an  equal  amount  of  productive  agency  will  receive  an 
equal  recompense  in  all  other  products ;  for  a  degree  of  agency, 
which  has  both  cost  and  received  6  dollars,  will  be  equally  well  paid 
with  one  that  cost  and  received  8  dollars. 

In  the  former  case,  then,  of  a  real  variation,  the  wealth  of  the 
community  will  have  received  an  accession;  in  the  latter,  of  relative 
variation,  it  will  have  remained  stationary ;  and  for  this  plain  reason ; 
because,  in  the  one  case  all  the  purchasers  of  cloth,  will  be  so  much 
the  richer,  without  the  seller  being  any  poorer ;  while  in  the  other, 
the  gain  of  the  one  class  will  be  exactly  equipoised  by  the  cor- 
responding loss  of  the  other.  In  the  former  case,  a  larger  amount 
of  products  will  be  procured  with  an  equal  charge  of  production, 
and  without  any  alteration  in  the  revenues  of  either  buyers  or  sellers: 
there  will  be  more  actual  wealth,  more  means  of  enjoyment,  with- 
out any  increased  expenditure  of  productive  means ;  the  aggregate 
utility  will  be  augmented;  the  quantum  of  products  procurable  for 
the  same  price  will  be  enlarged ;  all  which  are  but  varied  expres- 
sions of  the  same  meaning. 

But  whence  is  derived  this  accession  of  enjoyment,  this  larger 
supply  of  wealth,  that  nobody  pays  for?  From  the  increased  com- 
mand acquired  by  human  intelligence  over  the  productive  powers 
and  agents  presented  gratuitously  by  nature.  A  power  has  been 
rendered  available  for  human  purposes,  that  had  before  been  not 
known,  or  not  directed  to  any  human  object;  as  in  the  instance  of 
wind,  water,  and  steam-engines:  or  one  before  known  and  available 
is  directed  with  superior  skill  and  effect,  as  in  the  case  of  every  im- 
provement in  mechanism,  whereby  human  or  animal  power  is  as- 
sisted or  expanded.  The  merit  of  the  merchant,  who  contrives,  by 
good  management,  to  make  the  same  capital  suffice  for  an  extended 
business,  is  precisely  analogous  to  that  of  the  engineer,  who  simpli- 
fies machinery,  or  renders  it  more  productive. 

The  discovery  of  a  new  mineral,  animal,  or  vegetable,  possessed 
of  the  properties  of  utility  in  a  novel  form,  or  in  a  greater  degree  of 
abundance  or  perfection,  is  an  acquisition  of  the  same  kind.  The 
productive  means  of  mankind  were  amplified,  and  a  larger  product 
rendered  procurable  by  an  equal  degree  of  human  exertion,  when 
indigo  was  substituted  for  woad,  sugar  for  honey,  and  cochineal  for 
the  Tyrian  dye.  In  all  these  instances  of  improvement,  and  those 
of  a  similar  nature  that  may  be  hereafter  effected,  it  is  observable. 
..hat,  since  the  means  of  production  placed  at  the  disposal  of  man- 


300  ON   DISTRIBUTION.  BOOK  II 

kind  become  in  reality  more  powerful,  the  product  raised  always 
increases  in  quantity,  in  proportion  as  it  diminishes  in  value.  We 
shall  presently  see  the  consequences  of  this  circumstance.* 
•  A  fall  of  price  may  be  general  and  affect  all  commodities  at  once ; 
or  it  may  be  partial  and  affect  certain  commodities  only ;  as  I  shall 
endeavour  to  explain  by  example. 

Suppose  that,  when  stockings  were  made  by  knitting  only,  thread- 
stockings,  of  a  given  quality,  amounted  to  the  price  of  1  dollar  the 
pair.  Hence,  we  should  infer,  that  the  rent  of  the  land  whereon  the 
flax  was  grown,  the  profits  upon  the  labour  and  capital  of  the  culti- 
vators, those  of  the  flax-dresser  and  spinner,  with  those  likewise  of 
the  stocking-knitter,  amounted  altogether  to  the  sum  of  a  dollar  for 
each  pair  of  stocjdngs.  Suppose  that,  in  consequence  of  the  inven- 
tion of  a  stocking-machine,  1  dollar  will  buy  two  pair  of  stockings 
instead  of  one.  As  the  competition  has  a  tendency  to  bring  the 
price  to  a  level  with  the  cost  of  production,  we  may  infer  from  this 
reduced  price,  that  the  outlay  in  land,  capital,  and  labour,  necessary 
to  produce  two  pair  of  stockings,  is  still  no  more  than  1  dollar ;  thus, 
with  equal  means  of  production,  the  product  raised  is  doubled  in 
quantity.  And  what  is  a  convincing  proof  that  this  fall  is  positive, 
is  the  fact,  that  every  person,  of  what  profession  soever,  may  thence- 
forward obtain  a  pair  of  stockings  with  half  the  quantity  of  his  own 
particular  product  A  capitalist,  the  holder  of  5  per  cent,  stock,  was 
before  obliged  to  devote  the  annual  interest  of  20  dollars  to  the  pur- 
chase of  a  pair  of  stockings;  he  now  gives  the  interest  of  10  dollars 
only.  A  tradesman  selling  his  sugar  at  33^  cents  per  Ib.  must  be- 
fore have  sold  3  Ib.  of  sugar  to  buy  a  pair  of  stockings,  now  he  need 
but  sell  l£  Ib. :  he  therefore  sacrifices  in  the  pair  of  stockings  only 
half  the  means  of  production  "he  formerly  devoted  to  the  acquisition 
of  the  same  object. 

We  have  hitherto  supposed  this  product  alone  to  have  fallen  in 
price.  Let  us  suppose  two  products  to  fall,  stockings  and  sugar: 
that  by  an  improvement  of  commerce,  1  Ib.  of  sugar  cost  22  cents 
instead  of  33  cents.  In  this  case  all  purchasers  of  sugar,  including 
the  stocking-maker,  whose  product  has  likewise  fallen,  will  sacrifice, 
in  the  purchase  of  1  Ib.  of  sugar,  but  half  the  productive  means, 
which  they  before  allotted  for  that  purpose. 

The  truth  of  this  position  may  be  easily  ascertained.  When  sugar 
was  at  33^  cents  per  Ib.  and  stockings  at  a  dollar  the  pair,  the  stock- 

*  Within  the  last  hundred  years,  the  improvements  of  industry,  effected  by 
the  advance  of  human  knowledge,  more  especially  in  the  department  of  natural 
science,  have  vastly  abridged  the  business  of  production,  but  the  slow  progress 
in  moral  and  political  science,  and  particularly  in  the  branch  of  social  organisa- 
tion, has  hitherto  prevented  mankind  from  reaping  the  full  benefit  of  those  im- 
provements. Yet  it  would  be  wrong  to  suppose  they  have  reaped  none  at  all. 
The  pressure  of  taxation  has  indeed  been  doubled,  tripled,  or  even  quadrupled ; 
yet  population  has  increased  in  most  countries  of  Europe ;  which  is  a  sign,  that 
a  portion  at  least  of  the  increase  of  products  has  fallen  to  the  lot  of  the  subject ; 
and  the  population,  besides  being  augmented,  is  likewise  better  lodged,  clothed, 
arid  conditioned  and  I  believe  better  fed  too,  than  it  was  a  century  ago. 


CHAP.  III.  ON  DISTRIBUTION.  gfl] 

ing-maker  was  obliged  to  sell  one  pair  of  stockings,  before  he  could 
buy  3  Ibs.  of  sugar :  and,  as  the  charges  of  producing  this  pair  of 
stockings  were  one  dollar,  he  in  reality  bought  3  Ibs.  of  sugar  at  the 
price  of  a  dollar  value  in  his  own  productive  means;  in  like  manner 
as  the  grocer  bought  a  pair  of  stockings  for  3  Ibs.  of  sugar,  that  is 
to  say,  in  his  case  also,  for  one  dollar  value  of  his  peculiar  produc- 
tive means.  But  when  both  these  commodities  have  fallen  to  half 
their  price,  one  pair  only,  or  productive  means  equivalent  to  50 
cents,  would  buy  3  Ibs.  of  sugar ;  and  3  Ibs.  of  sugar,  procurable  at 
a  charge  of  production  amounting  to  50  cents,  will  suffice  to  pur- 
chase a  pair  of  stockings.  Wherefore,  if  two  kinds  of  products, 
which  we  have  set  one  against  the  other,  and  supposed  to  pass  in 
exchange  the  one  for  the  other,  can  both  have  fallen  in  price  at  the 
same  time,  are  we  not  authorised  to  infer,  that  this  fall  is  a  positive 
fall,  and  has  no  reference  or  relation  to  the  prices  of  commodities 
one  to  another  1  that  commodities  in  general  may  fall  at  one  and  the 
same  time,  some  more,  some  less,  and  yet  that  the  diminution  of 
price  may  be  no  loss  to  any  body  1 

It  is  for  this  reason,  that,  in  modern  times,  although  wages  stand 
in  nearly  the  same  relation  to  corn  as  they  did  four  or  five  hundred 
years  ago,  yet  the  lower  classes  now  enjoy  many  luxuries,  that  were 
then  denied  them ;  many  articles  of  dress  and  household  furniture, 
for  instance,  have  suffered  a  real  diminution  of  value ;  and  that  the 
same  individuals  are  more  scantily  supplied  with  others,  as  with 
butcher's  meat  and  game,*  because  they  have  sustained  a  real  in- 
crease of  value. 

Every  saving  in  the  cost  of  production  implies  the  procurement, 
either  of  an  equal  product  by  the  exertion  of  a  smaller  amount  of 
productive  agency,  or  of  a  larger  product  by  the  exertion  of  equal 
Agency,  which  are  both  the  same  thing ;  and  it  is  sure  to  be  followed 
by  an  enlargement  of  the  product.  It  may  be  thought,  perhaps, 
that  this  increase  of  production  may  possibly  take  place  without  any 
corresponding  increase  of  demand;  and,  therefore,  that  the  price 

*  I  find  in  the  Recherches  of  Dupre  de  Saint  Maur,  that  in  1342,  an  ox  was 
sold  from  10  to  11  livres  tournois.  This  sum  then  contained  7  oz.  of  fine  silver, 
which  was  worth  about  23  oz.  of  the  present  day ;  and  28  oz.  of  our  present  mo- 
ney are  coined  into  171  Jr.  30  c.,  (32  dollars,)  which  is  lower  than  the  price  of 
an  ordinary  ox.  A  lean  ox  bought  in  Poitou  for  300yK,  and  afterwards  fatted  in 
Lower  Normandy,  will  sell  at  Paris  for  from  450  to  500  fr.  (84  to  93  dollars.; 
Butcher's  meat  has,  therefore,  more  than  doubled  in  price  since  the  14th  cen- 
tury ;  and  probably  most  other  articles  of  food  likewise ;  and,  if  the  labouring 
classes  had  not  at  the  same  time  been  greatly  benefited  by  the  progress  of  indus- 
.ry,  and  put  in  possession  of  additional  sources  of  revenue,  they  would  be  worse 
fed  than  in  the  time  of  Philip  of  Valois. 

This  may  be  easily  explained.  The  growing1  revenues  of  the  industrious 
elasses  have  enabled  them  to  multiply,  and  consequently  to  swell  the  demand  for 
all  objects  of  food.  But  their  supply  can  not  keep  pace  with  the  increasing  de- 
mand, because,  although  the  same  surface  of  soil  may  be  rendered  more  produc- 
tive, it  can  not  be  so  to  an  indefinite  degree ;  and  the  supply  of  food  by  the  chan- 
nel of  external  commerce,  is  more  expensive  than  by  that  of  internal  agricultuip 
on  account  of  the  bulky  nature  of  most  of  the  articles  of  aliment. 
26 


302  ON  DISTRIBUTION.  BOOK  II. 

current  of  the  product  may  fall  below  the  cost  of  its  production, 
even  on  its  reduced  scale.  But  this  is  a  groundless  apprehension ; 
for  the  fall  of  price  tends  so  strongly  to  expand  the  sphere  of  con- 
sumption, that,  in  all  the  instances  I  have  been  able  to  meet  with, 
the  increase  of  demand  has  invariably  outrun  the  increasing  powers 
of  an  improved  production,  operating  upon  the  same  productive 
means;  so  that  every  enlargement  of  the  power  of  productive  agency 
has  created  a  demand  for  more  of  that  agency,  in  the  preparation 
of  the  product  cheapened  by  the  improvement. 

Of  this  a  striking  example  has  been  afforded  by  the  invention  of 
the  art  of  printing.  By  this  expeditious  method  of  multiplying  the 
copies  o»  a  literary  work,  each  copy  costs  but  a  twentieth  part  of 
what  was  before  paid  for  manuscript ;  an  equal  intensity  of  total 
demand,  would,  therefore,  take  off  only  twenty  times  the  number  of 
copies ;  but  probably  it  is  within  the  mark  to  say,  that  a  hundred 
times  as  many  are  now  consumed.  So  that,  where  there  was  for- 
merly one  copy  only  of  the  value  of  12  dollars  of  present  money, 
there  are  now  a  hundred  copies,  the  aggregate  value  of  which  is  60 
dollars,  though  that  of  each  single  copy  be  reduced  to  1-20.  Thus 
the  reduction  of  price,  consequent  upon  a  real  variation,  does  not 
occasion  even  a  nominal  diminution  of  wealth.* 

On  the  other  hand,  and  by  the  rule  of  contraries,  as  a  real  ad- 
vance of  price  must  always  proceed  from  a  deficiency  in  the  product 
raised  by  equal  productive  means,  it  is  attended  by  a  diminution  in 
the  general  stock  of  wealth ;  for  the  rise  of  price  upon  each  portion 
does  not  counterpoise  the  reduction  that  takes  place  in  the  tota 
quantity  of  the  commodity;  to  say  nothing  of  the  greater  relative 
clearness  of  the  object  of  consumption  to  the  consumer,  and  of  his 
consequent  impoverishment  in  comparison. 

Suppose  a  murrain,  or  a  bad  system  of  management,  to  cause  a 
scarcity  of  any  kind  of  live  stock,  of  sheep  for  instance,  the  price 
will  rise,  but  not  in  proportion  to  the  reduction  of  the  supply  ;  be- 
cause in  proportion  as  they  grow  dearer,  the  demand  will  decrease. 
If  there  were  but  one-fifth  of  the  present  number  of  sheep,  it  is  very 
probable  their  price  would  advance  to  no  more  than  double ;  so,  tha. 
in  place  of  five  sheep,  which  might  together  be  worth  20  dollars  at 
4  dollars  each,  there  would  remain  but  one  valued  at  8  dollars. 
The  diminution  of  wealth  in  the  article  of  sheep,  notwithstanding 
the  increased  price,  must  therefore  be  computed  at  60  per  cent., 
which  is  considerably  more  than  a  moiety .f 

*  Our  data  in  relation  to  the  products  of  former  times  are  too  few  to  enable  us 
to  deduce  from  them  any  precise  result ;  but  those  at  all  acquainted  with  the 
subject  will  see,  that,  whether  over  or  under-stated,  will  make  no  difference  in 
the  reasoning.  The  statistic  researches  of  the  present  generation  will  provide 
future  ages'  with  more  accurate  means  of  calculation,  but  will  add  nothing  to  the 
solidity  of  the  principles  upon  which  it  must  be  made. 

t  Of  this  nature  are  the  evil  effects  of  taxation,  (especially  if  it  be  exorbitant) 
npon  the  general  wealth  of  the  community,  independently  of  its  effects  upon  the 
individual  assessed.  The  cost  of  production,  and  consequently  the  real  price  of 
commodities,  are  aggravated  thereby,  and  their  aggregate  value  diminished. 


OHAP.  IIL  ON  DISTRIBUTION.  303 

Thus,  it  may  be  affirmed,  that  every  real  reduction  of  price, 
instead  of  reducing  the  nominal  value  of  produce  raised,  in  point  of 
fact,  augments  it;  and  that  a  real  increase  of  price  reduces,  instead 
of  adding  to  the  general  wealth ;  to  say  nothing  of  the  quantum  of 
human  enjoyment,  which  in  the  former  case  is  multiplied,  and  in  the 
latter  abridged.  Besides  it  would  be  a  capital  epror  to  imagine,  that 
a  real  fall  of  price,  or  in  other  words,  a  reduction  in  the  price  paid 
to  productive  exertion,  occasions  as  much  loss  to  the  producer  as 
gain  to  the  consumer.  A  real  depreciation  of  commodities  is  a 
benefit  to  the  consumer,  without  curtailing  the  profits  of  the  pro- 
ducer. The  stocking-maker,  who  for  one  dollar  manufactures  two 
pair  of  stockings  instead  of  one,  gains  as  much  upon  that  sum  as  if 
it  were  the  price  of  a  single  pair.  The  landed  proprietor  receives 
the  same  rent,  although,  by  a  better  rotation  of  crops,  the  tenant 
should  multiply  and  cheapen  the  produce  of  his  land.  Whenever, 
without  additional  fatigue  to  the  labourer,  means  are  devised  to 
double  the  quantity  of  work  he  can  perform,  the  ratio  of  his  daily 
gains  is  not  reduced,  although  his  product  is  sold  at  a  lower  price.* 

This  will  serve  to  confirm  and  explain  a  maxim,  which  has  been 
hitherto  imperfectly  understood,  and  even  disputed  by  many  writers, 
and  sects  of  political  reasoners ;  namely,  that  a  country  is  rich  and 
plentiful,  in  proportion  as  the  price  of  commodities  is  low.f 

For  argument's  sake,  I  will  put  the  matter  in  the  most  favourable 
light  for  those  who  dispute  this  maxim,  and  suppose  them  to  urge  an 
extreme  case,  namely,  that,  by  successive  economical  reductions,  the 
charges  of  production  are  at  length  reduced  to  nothing ;  in  which 
case,  it  u  evident  there  can  no  longer  be  rent  for  land,  interest  upon 

*  I  have  met  with  persons,  who  imagined  themselves  adding  to  national  wealth, 
by  favouring  the  production  of  expensive,  in  preference  to  that  of  cheaper  articles. 
In  their  opinion,  it  is  better  to  make  a  yard  of  rich  brocade  than  one  of  common 
sarsenet.  They  do  not  consider,  that,  if  the  former  costs  four  times  as  much  aa 
the  latter,  it  is  because  it  requires  the  exertion  of  four  times  as  much  productive 
agency,  which  could  be  made  to  produce  four  yards  of  the  latter,  as  easily  as  one 
of  the  former.  The  total  value  is  the  same ;  but  society  derives  less  benefit ;  for 
a  yard  of  brocade  makes  fewer  dresses  than  four  yards  of  sarsenet.  It  is  the 
grand  curse  of  luxury,  that  it  ever  presents  meanness  in  company  with  magnifi- 
cence. 

f  Dupont  de  Nemours  (Physiocratie.  p.  117.)  says,  that  "  it  must  not  be  sup- 
posed, that  the  cheapness  of  commodities  is  advantageous  to  the  lower  classes  ; 
for  the  reduction  of  prices  lessens  the  wages  of  the  labourer,  curtails  his  com- 
forts, and  affords  him  less  work  and  lucrative  occupation."  But  theory  and 
practice  both  controvert  this  position.  A  fall  of  wages,  occasioned  solely  by  a 
fall  in  the  price  of  commodities,  does  not  diminish  the  comforts  of  the  labourer , 
and,  inasmuch  as  the  low  price  of  wages  enables  the  adventurer  to  produce  at  a 
less  expense,  it  tends  powerfully  to  promote  the  vent  and  demand  foi  Jie  pro 
duce  of  labour. 

Melon,  Forbonnais,  and  all  the  partisans  of  the  exclusive  system,  or  balance 
of  trade,  concur  with  the  economists  in  this  erroneous  opinion ;  and  it  has  been 
re-affirmed  by  Sismondi,  in  his  Nouveaux  Prin.  d'Econ.  Pol.  liv.  iv.  c.  6. , 
where  the  lower  price  of  products  is  treated  as  an  advantage  gained  by  the  con- 
sumer upon  the  producer,  in  despite  of  the  obvious  impossibility  of  any  loss  to  the 
labouring  or  other  productive  classes,  by  a  reduction  tantamount  only  to  the 
saving  in  the  cost  of  production. 


304  ON  DISTRIBUTION.  BOOK  11 

capital,  or  wages  on  labour,  and  consequently,  no  longer  any  revenue 
to  the  productive  classes.  What  then?  Why  then,  I  say,  these 
classes  would  no  longer  exist.  Every  object  of  human  want  would 
stand  in  the  same  predicament  as  the  air  or  the  water,  which  are 
consumed  without  the  necessity  of  being  either  produced  or  pur- 
chased. In  like  manner  as  every  one  is  rich  enough  to  provide  him- 
self with  air,  so  would  he  be  to  provide  himself  with  every  other 
imaginable  product.  This  would  be  the  very  acme  of  wealth.  Po- 
litical economy  would  no  longer  be  a  science  ;  we  should  have  no 
occasion  to  learn  the  mode  of  acquiring  wealth  ;  for  we  should  find 
it  ready  made  to  our  hands. 

Although  there  be  no  instance  of  a  product  falling  to  nothing  in 
prije,  and  becoming  worth  no  more  than  mere  water,  yet  some 
kinds  have  undergone  prodigious  abatements ;  as  fuel  in  those  places 
where  coal-pits  have  been  discovered;  and  such  abatements  are  so 
many  approximations  to  that  imaginary  state  of  complete  abundance, 
x  have  just  been  speaking  of. 

If  different  commodities  have  fallen  in  different  ratios,  some  more, 
others  less,  it  is  plain  they  must  have  varied  in  relative  value  to 
each  other.  That  which  has  fallen,  stockings,  for  instance,  has 
changed  its  value  relatively  to  that  which  has  not  fallen,  as  butcher's 
meat;  and  such  as  have  fallen  in  equal  proportion,  like  stockings 
ind  sugar  in  our  hypothesis,  have  varied  in  real  though  not  in  rela- 
tive value. 

There  is  this  difference  between  a  real  and  a  relative  variation  of 
price :  that  the  former  is  a  change  of  value,  arising  from  an  altera- 
tion of  the  charges  of  production  ;  the  latter,  a  change,  arising  from 
an  alteration  of  the  ratio  of  value  of  one  particular  commodity  to 
other  commodities.  Real  variations  are  beneficial  to  buyers,  with- 
out injury  to  sellers;  and  vice  versa;  but  in  relative  ones,  what  is 
gained  by  the  seller  is  lost  by  the  purchaser,  and  vice  versa.  A 
dealer,  having  in  his  warehouse  100,000  Ibs.  of  wool  at  20  cents  per 
lb.,  is  worth  20,000  dollars;  if,  by  reason  of  an  extraordinary  de- 
mand, wool  should  rise  to  40  cent's  per  lb;,  that  portion  of  his  capi- 
tal will  be  doubled,  but  all  goods  brought  to  be  exchanged  for  wool 
will  lose  as  much  in  relative  value  as  the  wool  will  gain.  A  person 
in  want  of  100  Ibs.  of  wool,  who  could  before  have  obtained  it  by 
disposing,  say  of  20  bushels  of  wheat  valued  at  20  dollars,  must  now 
dispose  of  twice  that  quantity.  He  will  lose  the  20  dollars  gained 
by  the  wool-dealer;  and  the  nation  be  neither  enriched  nor  im- 
poverished.* 

The  Earl  of  Lauderdale  published  in  1807,  a  work,  entitled,  "  Researches  on 
he  Nature  and  Origin  of  Public  Wealth,  and  on  the  Causes  which  concur  in 
its  Increase ,•"  the  whole  reasoning  of  which  is  built  on  this  erroneous  proposition, 
that  the  scarcity  of  a  commodity,  though  it  diminish  the  wealth  of  society  in  the 
aggregate,  augments  that  of  individuals,  by  increasing  the  value  of  that  commo- 
dity in  the  hands  of  its  possessors.  Whence  the  author  deduces  the  unsound 
conclusion,  that  national,  differs  in  principle  from  individual  wealth.  He  hag 
not  perceived,  that,  whenever  a  purchaser  is  obliged  to  make  the  acquisition  by 
I'M  sacrifice  of  a  greater  value,  he  loses  just  as  much  as  the  seller  gains;  ana 


.  III.  ON  DISTRIBUTION.  305 

When  sales  of  this  kind  take  place  between  one  nation  and  an- 
other, the  nation,  that  sells  the  commodity,  which  has  advanced  in 
relative  price,  gains  to  the  amount  of  the  advance,  and  the  purchas- 
ing nation  loses  precisely  to  the  same  extent  Such  a  rise  of  price 
adds  nothing  to  the  general  stock  of  wealth,  existing  in  the  world, 
which  can  only  be  enlarged  by  the  production  of  some  new  utility, 
that  may  become  the  object  of  price  or  estimation  ;  whereas,  in  other 
cases,  one  always  loses  what  another  gains :  and  so  jt  is  with  all 
kinds  of  jobbing  transactions,  founded  upon  the  fluctuations  of  prices 
one  upon  another. 

In  all  probability,  the  time  is  not  very  distant,  when  the  Euro- 
pean states,  awake  at  length  to  their  real  interests,  will  renounce  the 
costly  rights  of  colonial  dominion,  and  aim  at  the  independent  colo- 
nization of  those  tropical  regions  nearest  to  Europe ;  as  of  some 
parts  of  Africa.  The  vast  cultivation  of  what  are  called  colonial 
products,  that  would  ensue,  could  not  fail  to  supply  Europe  in  the 
greatest  abundance,  and  probably  at  most  moderate  prices.  Such 
merchants  as  shall  then  have  stock  on  hand,  purchased  at  the  old 
prices,  certainly  will  make  a  loss  upon  that  stock ;  but  their  loss  will 
be  a  clear  gain  to  the  consumer,  who  will  for  a  time  enjoy  this  kind 
of  produce,  at  a  price  inferior  to  the  charge  of  production  ;  the  mer- 
chants will  gradually  replace  their  dear-bought  produce,  by  other  of 
equal  quality,  raised  with  superior  intelligence ;  and  the  consumer 
will  then  reap  the  advantage  of  superior  cheapness  and  multiplied 
enjoyment,  with  no  loss  to  any  body ;  for  the  merchant  will  both  buy 
and  sell  cheaper;  and  human  industry  will  have  made  a  rapid  stride, 
and  opened  a  new  road  to  affluence  and  abundance.* 

that  every  operation,  designed  to  procure  this  kind  of  benefit,  must  occasion  to 
one  party  a  loss,  equivalent  to  the  gain  of  another. 

He  likewise  refers  this  imaginary  difference  between  the  principle  of  public 
and  of  private  wealth  to  this  circumstance;  that  the  accumulation  of  capital, 
which  is  an  advantage  to  individual,  is  detrimental  to  national  wealth,  by  ob- 
structing the  consumption,  which  is  the  stimulus  of  industry.  He  has  fallen  into 
the  very  common  error  of  supposing,  that  capital  is,  by  accumulation,  withdrawn 
from  consumption;  whereas,  on  the  contrary,  it  is  consumed,  but  \n  a  re-produc- 
tive way,  and  so  as  to  afford  the  means  of  a  perpetual  recurrence  of  purchase, 
which  can  occur  but  once  in  the  case  of  unproductive  consumption.  Vide  Book 
III.  infra.  Thus  it  is,  that  a  single  error  in  principle,  vitiates  a  whole  work. 
The  one  in  question  is  built  upon  this  unsound  foundation  ;  and,  therefore,  serves 
only  to  multiply,  instead  of  reducing  the  intricacies  of  the  subject,  (a) 

*  The  vast  means  at  the  disposal  of  Napoleon  might  have  been  successfully 
directed  to  this  grand  object,  and  then  he  would  have  left  the  reputation  of  hav- 
ing contributed  to  civilize,  enrich,  and  people  the  world;  and  not  of  having  been 

(a)  The  error  of  Lauderdale  is  analogous  to  that  of  Sismondi  and  of  Malthus, 
and  arises  from  the  notion,  that  an  extension  of  productive  power  makes  an 
extension  of  unproductive  consumption  necessary ;  whereas,  it  is  thereby  ren- 
dered possible,  or  at  the  utmost  probable  only.  The  state,  as  well  as  its  sub- 
jects, may  consume  in  a  way  conducive  to  the  further  extension  of  productive 
power,  and  the  state,  like  an  individual,  is  powerful  and  wealthy  in  proportion 
to  the  extent  of  the  productive  sources  in  its  possession,  and  to  ti  e  feitility  of 
those  sources.  T. 

26*  2O 


306  ON  DISTRIBUTION.  BOOK  IL 


CHAPTER  IV. 

OF  NOMINAL  VARIATION  OF  PRICE,  AND  OF  THE  PECULIAR  VALUE 
OF  BULLION  AND  OF  COIN. 

IN  treating  of  the  elevation  and  depression  of  the  price  of  com- 
modities, although  value  has  been  expressed  in  money,  no  notice 
has  been  taken  of  the  value  of  money  itself;  which,  to  say  the  truth, 
plays  no  part  in  real,  or  even  in  relative  variation  of  the  price  of 
other  commodities.  One  product  is  always  ultimately  bought  with 
another,  even  when  paid  for  in  the  first  instance  in  money.  When 
the  price  of  wool  is  doubled,  it  is  purchased  with  twice  the  quantity 
of  every  other  commodity,  whether  the  exchange  be  made  directly, 
or  through  the  intermediate  agency  of  money.  The  baker,  who 
could  have  bought  1  Ib.  of  wool  with  6  Ibs.  of  bread,  or,  with  its 
price  in  money,  say  20  cents,  will  be  obliged  to  sacrifice  12  Ibs.  of 
bread  to  obtain  the  40  cents  necessary  to  purchase  1  Ib.  of  wool  at 
its  advanced  price.  But,  if  it  be  proposed  to  compare  together  the 
relative  value,  not  of  stockings,  meat,  sugar,  wool,  bread,  &c.,  but  of 
any  one  of  those  articles  with  that  of  money  itself,  we  shall  find,  that 
money,  like  all  other  commodities,  may  undergo,  and  often  has,  in 
fact,  undergone  a  real  variation ;  that  is  to  say,  a  variation  in  the 
cost  of  its  production ;  and  a  relative  one,  that  is  to  say,  a  change  of 
value,  in  comparison  with  other  products. 

Since  the  discovery  of  the  American  mines,  silver,  having  fallen 
to  about  a  fourth  of  its  former  value,  has  lost  three-fourths  of  its 
relative  value  to  all  other  products,  whose  price  has,  meanwhile 
remained  stationary;  as  to  that  of  corn,  for  instance  ;  consequently, 
one  must  give  4  oz.  of  silver  for  1  seller  (about  43  bushels)  of  wheat, 
which,  in  the  year  1500,  was  to  be  had  for  1  oz.  or  thereabout.  A 
commodity,  which,  since  that  period,  may  have  fallen  to  half  its 
price,  while  silver  was  falling  to  one-quarter,  will,  therefore,  have 
doubled  its  relative  value  to  silver,  for  this  commodity  then  cost  1 
oz.,  and  would  now  be  worth  4  oz*.  of  silver,  had  it  not  fallen  itself 
in  value ;  but  having  itself  lost  one-half  its  value,  it  is  sold  for  but  2 
oz. ;  that  is  to  say,  for  twice  as  much  silver  as  at  the  former  period. 

Such  is  the  effect  of  real  and  of  relative  variation  in  the  price  of 
silver.  But,  independently  of  these  variations,  there  have  been  vast 
alterations  in  the  denomination  given,  at  different  periods  during 
the  interim,  to  the  same  quantity  of  pure  metal,  which  should  make 
us  place  very  little  reliance  on  the  accuracy  of  our  estimate  of  real 
and  relative  variation. 

In  1514,  an  ounce  of  silver  would  purchase  1  setier  of  wheat, 

its  scourge  and  devastator.  When  the  Barbary  shore  shall  be  lined  with  peace- 
ful, industrious,  and  polished  inhabitants,  the  Mediterranean  will  be  an  immense 
lake,  furrowed  by  the  commerce  of  the  wealthy  nations,  peopling  its  shores  on 
every  side. 


CHAP.  IV.  ON  DISTRIBUTION.  30? 

which  is  now  worth  4  oz. ;  this  was  a  relative  variation  of  silver  to 
wheat.  This  quantity  of  silver  then  was  denominated  30  sous  ;* 
and,  had  the  same  quantity  of  silver  still  preserved  the  same  denom- 
ination, 4  oz.  would  now  be  called  120s.  or  Gfr.  Thus,  wheat  at  6 
fr.  the  seller  would  have  risen  in  relation  to  silver,  or  silver  have 
fallen  in  comparison  with  wheat.  There  would,  however,  have 
been  no  nominal  variation.  But  4  oz.  of  silver  are  now  denominated 
24  fr.  instead  of  Qfr. ;  so  that  there  has  been  a  nominal  as  well  as  a 
relative  variation, — a  mere  verbal  alteration.  The  real  and  relative 
variation  has  been  in  the  ratio  of  4  to  1 ;  but  the  nominal  value  of 
money  has  declined  in  the  ratio  of  Ib  to  1,  since  1514. 

It  is  obvious,  therefore,  that  one  cannot  form  an  idea  of  the  value 
of  a  commodity  from  its  estimate  of  money  price,  except  during  a 
space  of  time,  and  within  a  space  of  territory,  in  which  neither  the 
denomination  of  the  coin,  nor  the  value  of  its  material,  has  under- 
gone any  change ;  else  the  valuation  will  be  merely  nominal,  and 
convey  no  fixed  idea  of  value  whatever.  To  say  that  the  setter  of 
wheat  sold  for  30  sous  in  1514,  without  explaining  the  then  value 
of  30  sous,  is  giving  us  a  price,  that  conveys  either  no  idea  at  all,  or 
a  fallacious  one,  if  it  be  meant  to  affirm,  that  the  setter  of  wheat  was 
then  worth  30  sous  of  present  money.  In  comparing  values,  the 
denomination  of  coin  is  useful  only  inasmuch  as  it  designates  the 
quantity  of  pure  metal  contained  in  the  sum  specified.  It  may  serve 
to  denote  the  quantity  of  the  metal ;  but  never  serve  as  an  index  of 
value  at  any  distance  of  time,  or  of  place. 

It  is  scarcely  necessary  to  point  out  the  effects  of  an  alteration  in 
the  quantity  of  metal,  to  which  a  fixed  denomination  is  given,  upon 
natioual  and  individual  property.  Such  an  expedient  can  neither 
increase  nor  diminish  the  real,  or  even  the  relative  value,  either  of 
the  metal  or  of  any  other  commodity.  If  1  oz.  of  silver  be  struck 
into  two  crowns  instead  of  one,  two  crowns  -will  be  paid  wherever 
one  was  given  before ;  that  is  to  say,  1  oz.  of  silver  will  be  given  in 
either  case :  so  that  the  value  of  silver  will  not  have  varied.  But 
when  a  sale  has  been  made  on  credit  for  a  given  time,  and  payment 
stipulated  in  crowns,  the  seller  may  be  liable  to  receive  ^  oz.  in  each 
crown,  instead  of  1  oz.  according  to  the  intention  of  the  contract- 
ing parties.  This  transfer  of  the  old  denomination  to  a  different 
portion  of  metal  will,  therefore,  unjustly  benefit  the  one  party,  to 
the  injury  of  the  other.  For  every  profit  to  one  individual  is  a  loss 
to  another,  unless  it  arise  from  actual  production,  or  from  greate/ 
economy  in  the  charges  of  production,  which  is  equivalent  to  actual 
•  production. 

With  regard  to  the  peculiar  and  inherent  value  of  bullion  or  of 
money,  it  originates,  like  that  of  all  other  commodities,  in  the  uses 
to  which  it  is  applicable,  as  we  have  before  observed.  The  degree 
of  that  value  is  greater  or  less,  according  as  its  use  is  more  or  less 

*  Trait e  Historique,  Leblanc :  and,  Essai  sur  les  Monnaies,  by  Dupre  de 
Saint  Maur 


308  ON  DISTRIBUTION.  BOOK  H. 

extensive,  its  employment  more  or  less  necessary,  and  its  supply 
more  or  less  abundant. 

Gold  and  silver,  though  the  most  common  materials  of  money 
can  not  act  as  such  while  in  an  uncoined  state ;  they  are  then  not 
money,  but  the  raw  material  of  money.  In  the  present  condition 
of  society,  every  individual  can  not  turn  bullion  into  coin  at  his 
pleasure;  and,  therefore,  coin  may  be  of  considerably  higher  value 
than  bullion  of  the  same  standard  of  weight  and  quality,  if  the  de- 
mand for  coin  be  more  urgent  than  the  demand  for  bullion.  But 
bullion  can  never  be  perceptibly  higher  in  value  than  coin  of  equal 
weight  and  quality;  because  the  latter  may  be  readily  converted 
into  the  former.  The  reason  why  coin  so  seldom  much  exceeds 
bullion  in  value  is,  that  the  avidity  of  governments,  which  are 
monopolists  of  the  business  of  coinage,  to  profit  by  the  difference 
between  coin  and  bullion,  has  led  them  into  the  error  of  overstock- 
ing the  market  with  their  manufacture  of  coin.  Thus  it  is,  that  coin 
is  never  depressed  in  value  below,  ahd  rarely  much  elevated  above 
bullion.  Wherefore,  the  detail  of  the  circumstances,  that  have 
hitherto  been,  or  may  hereafter  be,  the  occasion  of  variations  in  the 
intrinsic  value  of  golfl  or  silver  bullion,  will  serve  at  the  same  time 
to  explain  the  variations  of  their  value  in  the  peculiar  character  of 
money. 

It  has  already  been  noticed,*  that  the  ten-fold  supply  of  thpse 
metals,  poured  into  the  market  in  consequence  of  the  discovery  of 
America,  did  not  effect  a  corresponding  reduction  of  their  value  to 
-pr  of  what  it  had  before  been.  For,  the  demand  for  them  was  at 
the  same  period  greafly  enlarged  by  the  contemporaneous  increase 
of  commerce,  manufacture,  and  luxury.  All  the  leading  states  of 
Europe  had  before  been  wholly  destitute  of  industry  :  the  circulation 
of  products,  whether  as  capital  or  for  mere  consumption,  was  very 
trifling  in  amount.  Industry  and  productive  energy  made  a  sudden 
and  simultaneous  effort  all  over  Europe ;  and  the  commodity  em- 
ployed as  the  material  of  money,  the  agent  of  exchange,  could  not 
but  come  more  in  demand,  upon  the  greater  extent  and  frequency 
of  mutual  dealings.  About  the  same  time,  the  new  route  to  the 
Eastern  ocean,  by  rounding  the  Cape  of  Good  Hope,  was  discover- 
ed, and  drew  abundance  of  adventurers  into  that  direction ;  the 
products  of  the  East  obtained  a  more  general  consumption ;  but 
Europe,  having  no  other  products  of  her  own  to  offer  in  exchange. 
wns  compelled  to  give  the  precious  metals,  of  which  India  absorbed 
an  immense  quantity.  Nevertheless,  the  multiplication  of  products 
tended  to  the  increase  and  diffusion  of  wealth ;  mere  higlers  grew  up 
mto  opulent  merchants,  and  the  fishing  towns  of  Holland  already 
reckoned  amongst  their  citizens  individuals  worth  200,000  dollars. 
The  costly  objects,  that  none  but  princes  could  before  aspire  to 
possess,  became  attainable  by  the  commercial  classes  ;  and  the  in 
•jreasing  taste  for  plate  and  expensive  furniture  created  a  greater 

*  Supra,  book  i.  chap.  21.  sect.  7. 


CHAP  IV.  ON  DISTRIBUTION.  309 

demand  for  gold  and  silver  to  be  employed  on  those  objects. 
Beyond  all  question,  the  value  of  those  metals  would  have  prodi- 
giously advanced,  had  not  the  mines  of  America  been  then  oppor-. 
tunely  discovered. 

Their  discovery  completely  turned  the  scales.  The  rapid  increase 
of  the  use  and  demand  for  gold  and  silver  was  far  more  than  coun- 
terbalanced by  the  increasing  supply,  which  completely  glutted  the 
market.  Hence  the  great  reduction  of  their  value,  which  has  been 
before  observed  upon,  and  which  would  have  been  far  greater  still, 
but  for  the  concurrence  of  the  circumstances  just  stated,  whereby  the 
value  of  silver,  or  its  price  in  commodities  at  large,  was  checked  in 
its  fall,  and  limited  to  one-fourth,  instead  of  being  depressed  in  equal 
ratio  with  the  increased  supply,  that  is  to  say,  to  one-tenth. 

This  counteracting  force  must  have  escaped  the  penetration  of 
Locke,  or  he  would  not  have  said,  that  the  tenfold  increase  of  silver, 
since  the  year  1500,  necessarily  raised  the  price  of  commodities  in 
a  tenfold  degree.  The  few  instances  he  might  have  cited  in  support 
of  his  position,  were  by  no  means  sufficient  to  establish  its  accuracy ; 
for  a  far  greater  number  and  variety  of  products  might  be  mentioned, 
for  which,  as  well  as  for  silver,  the  demand  compared  with  the  sup- 
ply had  increased  in  the  ratio  of  2|  to  1,  between  1500  and  the  date 
of  the  work  of  Locke  in  question.*  But,  although  this  may  be  true 
of  some  particular  products,  it  may  not  be  so  of  abundance  of  others, 
for  some  of  which  the  demand  has  not  advanced  at  all  since  1500, 
while  the  supply  of  others  has  kept  pace  with  the  progressive 
demand,  and  consequently  the  ratio  of  their  value  remained  station- 
ary, with  the  exception  of  trifling  temporary  variations  arising  from 
causes  of  a  nature  wholly  distinct ;  which,  by  the  way,  should  teach 
us  the  necessity,  in  this  science,  of  submitting  insulated  facts  to  the 
test  of  reasoning :  for  fact  will  not  subvert  theory,  unless  the  whole 
of  the  facts  applicable  be  taken  into  consideration,  as  well  as  the 
whole  of  the  circumstances,  that  may  yary  the  nature  of  those  facts  • 
which  is  hardly  possible  in  any  case. 

*  Th,e  increased  intensity  of  the  demand  for  silver  compared  with  its  supply, 
consequent  upon  the  discovery  of  America,  is  stated  at  2£  to  1,  because,  but 
for  this  increase  of  demand,  the  tenfold  supply  would  have  reduced  its  value  to 
one-tenth  of  what  it  had  been  previously  to  that  event,  and  given  to  100  oz.  the 
value  of  10  oz.  only.  But  100  oz.  were  only  reduced  to  one-fourth  of  their 
former  value,  i.  e.  to  the  value  of  25  oz. ;  which  bears  to  10  oz.  the  ratio  of  24 
to  1.  This  could  not  have  been  the  case,  unless  the  demand  for  silver,  compared 
with  the  supply,  had  advanced  in  that  proportion.  But  the  supply  having 
increased  tenfold  in  the  same  interval,  if  we  would  find  the  ratio  of  the  actual 
increase  of  the  demand  for  silver,  whether  for  the  purposes  of  circulation,  of 
luxury,  or  of  manufacture,  since  the  first  discovery  of  the  American  mines,  we 
must  multiply  2?  by  10,  which  will  give  25.  And  probably  this  estimate  will 
not  exceed  the  truth,  although  25  times  may  seem  a  prodigious  advance.  How- 
ever, it  would  doubtless  have  been  infinitely  less  considerable,  but  for  the  in- 
flux of  supply  from  America;  for  the  excessive  dearness  of  silver  would  have 
greatly  curtailed  the  use  of  it.  Silver  plate  would  probably  be  as  rare  as  gold 
plate  is  now ;  and  silver  coin  would  be  less  abundant,  because  it  would  £0  fur 
ther,  and  be  of  higher  value 


310  ON  DISTRIBUTION.  BOOK  IL 

The  writers  of  the  Encyclopedic  have  fallen  into  the  same  error, 
in  stating,*  that  a  household  establishment,  wherein  the  silver  plate 
should  n*ot  have  varied  in  quantity  or  quality  from  the  middle  of  the 
sixteenth  century  to  the  present  time,  would  be  but  one-tenth  as  rich 
in  plate  now  as  at  the  former  period.  Whereas,  its  comparative 
wealth  would  be  reduced  to  one-fourth  only;  since,  although  the 
increase  of  supply  has  depressed  that  value  to  ,'o'V,  the  increase  of 
demand,  on  the  other  hand,  has  raised  it  to  tV^.f 

It  is  deserving  of  attention,  that  the  major  part  of  the  coin  is  in 
constant  circulation,  in  the  appropriate  .sense  of  the  word,  as  defined 
above.  In  this  respect  it  differs  from  most  other  commodities;  for 
they  are  in  circulation  only  so  long  as  they  are  in  the  hands  of  the 
dealers,  and  retire  from  it  as  soon  as  transferred  to  the  consumer. 
Money,  even  when  employed  as  capital,  is  never  desired  as  an  object 
of  consumption,  but  merely  as  one  of  barter ;  every  act  of  purchase 
is  an  offer  of  money  in  barter,  and  a  furtherance  of  its  circulation. 
The  only  part  withdrawn  from  circulation  is  what  may  be  hoarded 
or  concealed,  which  is  always  done  with  a  view  to  its  re-appearance. 

Gold  or  silver,  in  the  shape  of  plate,  embroidery,  or  jewellery,  is 
in  circulation  only  while  in  quest  of,  or  in  readiness  for  a  purchaser; 
which  it  ceases  to  be,  when  it  reaches  the  possession  of  the  con- 
sumer. 

The  general  use  of  silver  amongst  all  the  civilized  nations  of  the 
world,  coupled  with  its  great  facility  of  transport,  makes  it  a  commo- 
dity of  such  extensive  demand,  that  none  but  a  very  large  influx  of 
fresh  supply  can  sensibly  affect  its  value.  Thus,  when  Xeqophon, 
in  his  essay  on  the  revenues  of  Athens,  urges  his  countrymen  to 
give  more  assiduous  attention  to  the  working  of  the  mines  of  Attica, 
by  the  suggestion,  that  silver  does  not,  like  other  commodities, 
decline  in  value  with  the  increase  in  quantity,  he  must  be  understood 
to  say,  that  it  does  not  perceptibly  decline.  Indeed,  the  mines  of 
Attica  were  too  inconsiderable  in  their  product,  to  influence  the 
value  of  the  stock  of  that  metal  then  existing  in  the  numerous  and 
flourishing  states  upon  the  borders  of  the  Mediterranean  Sea,  and  in 
Persia  and  India ;  between  all  which  and  Greece  the  commercial 
intercourse  was  sufficiently  acthe,  to  keep  the  value  of  silver  sta- 
tionary in  the  Grecian  market.  The  driblet  of  silver,  furnished  by 
Attician  metallurgy,  was  a  mere  rivulet  trickling  into  an  ocean  of 
existing  supply.  It  was  impossible  for  Xenophon  to  foresee  the 
'nflux  of  the  American  torrent,  or  to  guess  at  the  consequence  of 
its  irruption. 

If  silver  were,  like  corn  and  other  fruits  of  the  earth,  an  object  of 
human  food  and  sustenance,  the  enlargement  of  the  sources  of  its 

*  Art.  Monnaies. 

\  If  we  are  to  believe  Ricardo,  the  increase  of  demand  has  no  effect  upon 
value,  which  is  determined  solely  by  the  cost  of  production.  He  seems  not  to 
have  perceived,  that  it  is  demand  that  makes  productive  agency  an  object  of 
Hppreciation.  A  diminution  of  the  demand  for  silver  bullion  would  throw  all 
those  mines  out  of  work,  of  which  the  lower  scale  of  price  was  not  adequate  to 
Jl*e  charges  of  bringing  the  product  to  market 


CHAP.  IV.  ON  DISTRIBUTION.  31 1 

supply  would  not  have  lowered  its  value ;  for  the  strong  impulse  of 
the  human  race,  towards  the  multiplication  of  their  species  to  a  level 
with  the  means  of  subsistence,  would  have  made  the  demand  keep 
pace  with  the  increase  of  supply.  The  tenfold  multiplication  of 
corn  would  be  followed  by  a  tenfold  increase  of  the  demand  for  it ; 
inasmuch  as  it  would  engender  new  mouths  to  consume  it;  and  corn 
would  maintain  nearly  the  same  average  of  relative  value  to  other 
commodities. 

This  will  explain,  why  the  variations  of  the  value  of  silver  are 
both  slow  in  operation,  and  considerable  in  amount.  Their  slow- 
ness is  owing  to  the  universality  of  the  demand,  which  prevents 
a  moderate  variation  of  supply  from  being  sensibly  felt ;  and  their 
magnitude  to  the  limited  uses  of  the  metal,  which  prevent  the  in- 
crease of  demand  from  keeping  pace  with  a  rapid  increase  of  supply 

Silver  has  utility  for  the  purposes  of  plate,  furniture,  and  orna- 
ment, as  well  as  for  those  of  money ;  and  is  the  more  copiously 
employed  on  those  objects,  in.  pro  portion  to  the  degree  of  national 
wealth.  Its  use  in  the  peculiar  character  of  money  is  proportionate 
to  the  quantity  of  moveable  and  immoveable  objects  of  property,  that 
there  may  be  to  be  circulated ;  wherefore,  coin  would  be  more  abun- 
dantly required  in  richer  than  in  poorer  nations,  were  not  the  follow- 
ing circumstances  to  control  this  general  rule. 

1.  The  superior  rapidity  of  circulation,  both  of  money  and  com- 
modities in  a  state  of  national  opulence,  which  makes  a  smaller 
quantity  of  money  requisite,  in  proportion  to  the  total  of  commer- 
cial dealings.     The  same  sum  in  a  nT,h  country  will  effect  perhaps 
ten  successive  operations  of  exchange  in  the  same  space  of  time,  as 
one  in  a  poor  country.*    Wherefore,  the  multiplication  of  commo- 
dities to  be  circulated  is  not  necessarily  attended  with  a  co-extensive 
increase  of  the  demand  for  money?    The  business  of  circulation  is 
extended ;  but  the  agent  of  circulation  becomes  more  active  and 
efficient 

2.  In  a  state  of  national  opulence,  credit  is  a  more  frequent  sub- 
stitute for  money.  .  In  Chap.  XXII,  of  the  preceding  book,  it  has 
been  shown  how  a  portion  of  the  national  money  may  be  dispensed 
with  by  the  employment  of  convertible  paper,  without  any  resulting 
inconvenience.f     By  this  expedient,  the  use  of  metal  money,  and, 
consequently,  the  demand  for  silver  for  the  purposes  of  money,  is 
considerably  diminished.     Nor  is  convertible  paper  the  sole  expe- 

*  In  a  poor  country,  after  a  dealer  has  disposed  of  his  wares,  he  is  sometimes 
a  long  while  before  he  can  provide  himself  with  the  returns  he  has  in  view  ;  and, 
during  the  interval,  the  money-proceeds  remain  idle  in  his  hands.  Moreover, 
in  a  poor  country,  the  investment  of  money  is  always  difficult.  Savings  are 
slow  and  gradual,  and  are  seldom  turned  to  profitable  account,  until  after  a  lapse 
of  many  years;  so  that  a  great  deal  of  money  is  always  lying  by  in  a  state  of 
inaction. 

t  Ricardo,  whom  I  look  upon  as  the  individual  in  Europe  the  best  acquainted 
with  the  subject  of  money,  both  in  theory  and  in  practice,  has  shown,  in  his 
Proposal  for  an  economical  and  secure  Currency,  that,  when  the  good  govern- 
ment of  the  state  may  be  safely  reckoned  upon,  paper  may  be  substituted  for  the 
whole  of  a  metallic  money  ;  and  a  material  possessed  of  no  intrinsic  value  b» 


ON  DISTRIBUTION.  BOOK  II. 

dicnt  of  substitution  amongst  an  industrious  and  commercial  people: 
every  kind  of  private  obligations  and  covenants,  as  well  as  sales  on 
credit,  transfers  of  money-credit,  and  even  mere  debtor  and  creditor 
accounts  current,  have  an  effect  precisely  analogous. 

Thus  the  necessity,  and  consequently  the  demand,  for  metal  mo- 
ney never  advances  in  equal  ratio  with  the  progressive  multiplica- 
tion of  other  products;  and  it  may  be  truly  said,  that  the  richer  a 
nation  is,  the  smaller  is  the  amount  of  its  coin,  in  comparison  with 
other  nations. 

Were  the  quantum  of  the  supply  alone  to  determine  the  exchange- 
able value  of  a  commodity,  silver  would  stand  to  gold  in  the  ratio  of 
1  to  45  ;  for  silver  and  gold  are  produced  by  metallurgy  as  45  to  1.* 
But  the  demand  for  silver  is  greater  than  for  gold ;  its  uses  are  both 
far  more  general  and  far  more  various ;  and  thus  its  relative  value 
is  prevented  from  falling  lower  than  1  to  15. 

A  portion  of  the  demand  for  the  precious  metals  is  occasioned  by 
their  gradual  destruction  by  use ;  for,  although  less  subject  to  decay 
than  most  products,  they  are  still  perishable  in  a  certain  degree;  and 
doubtless  the  wear,  though  slow,  must  be  considerable  upon  the  im- 
mense quantity  of  gold  and  silver  in  constant  use,  as  well  in  the 
character  of  money,  as  in  the  various  objects  of  spoons,  forks,  gob- 
lets, dishes,  and  jewellery  of  all  sorts.  There  is  likewise  a  large 
consumption  in  plating  and  gilding.  Smith  asserts,  that  the  manu- 
facturers of  Birmingham  alone,  in  his  time,  worked  up  annually,  as 
much  as  the  worth  of  50,0007.  in  these  ways.f  A  further  allowance 

skilful  management,  be  made  to  supplant  a  dear  and  cumbrous  one,  whose  me- 
tallic properties  are  never  called  into  play  by  the  functions  of  money. 

*  Humboldt.  Essai  Pol.  sur  la  Nouvelle  Espagne,  8vo.  torn.  iv.  p.  222. 

t  Wealth  of  Nations,  book  i.  c.  11^  The  manufacturing  consumption  of  Bir- 
mingham and  other  towns  has  greatly  increased  since  the  date  of  that  work.(l) 

(1)  Mr.  Jacobs,  in  his  work  on  the  precious  metals,  to  which  we  have  already 
had  occasion  to  refer,  has  shed  much  light  on  the  consumption,  as  well  as  on 
the  production,  of  gold  and  silver,  both  before  and  since  the  discovery  of  the 
American  continent.  His  twenty-sixth  chapter  is  devoted  to  an  inquiry  into  the 
consumption  of  the  precious  metals  from  1810  to  1830.  This  chapter  abounds 
with  highly  instructive  and  curious  details,  which  it  would  be  here  impossible 
to  present,  but  which  furnish  the  grounds  of  the  following  statements,  also  taken 
from  the  same  chapter,  and  which  fully  demonstrate  the  great  increase  in  the 
consumption  of  gold  and  silver,  in  what  our  author,  in  this  note,  calls  "  the 
manufacturing  consumption,"  since  the  date  of  Dr.  Adam  Smith's  work  on  the 
Wealth  of  Nations,  to  which  he  refers. 

According,  then,  to  Mr.  Jacobs,  the  annual  consumption  of  the  precious 
rnetals,  from  18 JO  to  1830,  in  their  application  to  ornamental  and  luxurious  pur- 
poses, he  estimates  as  follows : 

In  Great  Britain,     ....  2,457,221J. 

France 1,200,000 

Switzerland, &50.000 

The  rest  of  Europe,      .     .  1,605,490 

America,    ......  280,630 


Making  the  whole  amount,   ....    5,893,341*.  equal  to  28,288,036  dollars. 

AMERICAN  EDITOR. 


CHAP.  IV.  ON  DISTRIBUTION.  313 

must  be  made  for  the  consumption  of  embroidery,  tissue,  book-bind- 
ing, &c.,  all  which  may  be  set  down  as  finally  lost  to  other  purposes. 
Add  to  this  the  buried  hoards,  the  knowledge  of  which  dies  with 
the  possessor,  and  the  quantity  lost  by  shipwreck. 

If  the  nations  of  the  world  go  on  increasing  their  wealth,  as  most 
of  them  certainly  have  done  for  the  last  three  centuries,  their  want 
of  the  precious  metals  will  progressively  advance,  as  well  in  conse- 
quence of  the  gradual  wear,  which  will  be  greater  in  proportion  to 
their  increasing  use,  as  of  the  multiplication  and  increased  aggregate 
value  of  other  commodities,  which  will  create  a  larger  demand  for 
the  purposes  of  transfer  and  circulation.  If  the  produce  of  the 
mines  do  not  keep  pace  with  the  increasing  demand,  the  precious 
metals  will  rise  in  value,  and  less  of  them  be  given  in  exchange  for 
other  products  in  general.  If  the  progress  of  mining  shall  keep 
pace  with  the  advances  of  human  industry,  their  value  will  remain 
stationary,  as  it  seems  to  have  done  for  the  last  two  centuries ;  during 
which  the  demand  and  supply  have  regularly  advanced  together.* 

*  We  are  assured  by  Humboldt,  that  the  produce  of  the  mines  of  Mexico  has, 
in  the  last  100  years,  been  increased  in  the  ratio  of  110  to  25;  also,  that  such  is 
the  abundance  of  silver  ore,  in  the  chain  of  the  Andes,  that,  reckoning  the  num- 
ber of  veins  either  worked  superficially,  or  not  worked  at  all,  one  would  be  led 
to  imagine,  that  Europe  has  hitherto  had  a  mere  sample  of  their  incalculable 
stores.  Essai  Pol.  sur  la  N.  Espagne,  8vo.  torn.  iv.  p.  149. 

The  very  slight  and  gradual  depreciation  of  gold  and  silver,  effected  by  their 
immense  and  increasing  annual  supply,  is  one  amongst  many  proofs  of  the  rapid 
and  general  advance  of  human  wealth,  whereby  the  demand  is  made  to  keep 
pace  with  the  supply.  Yet  I  am  inclined  to  think,  that  their  value,  after  remain- 
ing nearly  stationary  for  a  century,  has  within  the  last  thirty  years  begun  again 
to  decline.  The  seller  of  wheat,  Paris  measure,  which  was  for  a  long  time,  on 
an  average,  sold  for  4  oz.  of  silver,  has  now  risen  to  4^  oz.,  and  rents  are 
raised  upon  every  renewal  of  lease.  All  other  things  seem  to  be  rising  in  the 
like  proportion :  which  indicates,  that  silver  is  undergoing  a  depreciation  of  rela- 
tive value.  (1) 

(1)  In  a  former  note  we  referred  to  the  great  decline,  since^the  year  1809,  in 
the  productiveness  of  the  whole  mines,  both  in  this  and  in  the  eastern  continent, 
on  the  authorities  which  Mr.  Jacobs  has  given,  in  his  learned  work  on  the  pre- 
cious metals.  From  the  same  work,  we  here  extract  his  concluding  observations 
of  the  twenty-sixth  chapter,  in  relation  to  the  stock  of  coin  now  in  existence, 
by  which  it  will  appear,  that  during  the  twenty  years  from  1810  to  1830, 
the  diminution  of  gold  and  silver  coin  amounted  to  nearly  one-sixth  part  of  the 
whole  stock. 

"  We  have  estimated,"  says  Mr.  Jacobs,  "  the  stock  of  coin  in  existerice  at 
the  end  of  the  year  1809  to  have  been  380  million  pounds;  and  the  additions 
made  to  it  between  that  period  and  the  year  1829,  at  the  rate  of  5,186,800 
pounds  annually,  would  make  it  103,736,000  pounds. 
From  the  380,000,000  of  coin  left  in  1809,  we  deduct  for  loss 
by  abrasion,  at  the  rate  of  1  part  in  400  in  each  year,  which 
in  the  20  years  would  amount  to  18,095,2202.,  thus  leaving 

in  1829, 361,904,780*. 

To  which  may  be  added  the  supply  from  the  mines,     ....     103,736,000 

Thus  showing  .  ,  ' .    , 465,640,730.' 

27  2P 


314  ON  DISTRIBUTION.  BOOK  II. 

And,  if  the  supply  of  those  metals  outrun  the  progress  of  general 
wealth,  as  it  seems  to  be  doing  at  this  moment,  they  will  fall  in  re- 
spect to  other  commodities  at  large.  Metal-money  will  thereby  be 
rendered  more  cumbrous;  but  the  other  uses  of  gold  and  silver  will 
be  more  widely  diffused. 

It  would  be  a  long  and  tedious  task  to  expose  all  the  false  reason- 
ing  and  erroneous  views,  originating  in  the  perpetual  confusion  of 
the  different  kinds  of  variation,  that  it  has  cost  so  much  time  to  ana- 
lyze and  distinguish.  It  is  enough  to  put  the  reader  into  a  condition 
himself  to  discover  their  fallacy,  and  estimate  the  tendency  of  mea- 
sures avowedly  directed  to  influence  public  wealth,  by  operating 
upon  the  scale  of  value. 


CHAPTER  V. 

OF  THE  MANNER  IN  WHICH  REVENUE  IS  DISTRIBUTED  AMONGST  SOCIETY. 

THE  causes,  which  determine  the  value  of  things,  and  which  ope. 
rate  in  the  way  described  in  the  preceding  chapters,  apply  without 
exception  to  all  things  possessed  of  value,  however  perishable; 
amongst  others,  therefore,  to  the  productive  service  yielded  by  in- 
dustry, capital,  and  land,  in  a  state  of  productive  activity.  Those, 
who  have  had  at  their  disposal  any  one  of  these  three  sources  of 

From  which  must  be  deducted  that  converted 

into  utensils  and  ornaments,  .     .  • .     .     5,612,611 
And  that  transferred  into  Asia,       .     .     .     2,000,000 


7,612,611  annually. 
Or  in  twenty  yeajs, 152,252,220 

This  would  show  the  estimated  amount  at  the  end  of  1829  to  be,  313,888,560?. 

Or  less  than  at  the  end  of  1809, 66.61 1,440J. 

Or  a  diminution  of  nearly  one-sixth  part  in  the  twenty  years." 

"  During  the  period  we  have  been  considering,  and  indeed  for  many  years 
before,  the  comparative  value  of  gold  to  silver  had  scarcely  experienced  any 
alteration.  According  to  the  view  here  taken,  the  amount  of  gold  applied  to 
purposes  of  luxury  had  far  exceeded  that  of  silver,  perhaps  in  the  proportion  of 
four  to  one ;  but,  on  the  other  hand,  the  treasure  transferred  to  India  and  China 
ha&  consisted  chiefly  of  silver,  and  much  more  gold  had  been  brought  to  Europe 
from  those  countries  than  had  been  conveyed  to  them.  It  has  before  (twenty- 
fifth  chapter  of  this  inquiry)  been  attempted  to  be  shown  that  the  durability  of 
gold  in  coin  is  in  the  proportion  of  four  to  one  greater  than  that  of  silver.  It 
lias,  too,  been  shown  that  the  recently  increased  produce  of  the  mines  of  Russia 
lias  consisted  chiefly  of  gold.  These  circumstances,  on  which  our  limits  do  not 
admit  of  enlargement,  might  be  shown  to  be  sufficient  to  account  for  the  equable 
rate  of  value  which  has  been  preserved  between  the  two  metals  during  a  long 
" 

AMERICAN  EDITOR. 


CHAP.  V.  ON  DISTRIBUTION.  315 

production,  are  the  venders  of  what  \ve  shall  here  denominate  pro- 
ductive agency;  and  the  consumers  of  its  product  are  the  purchasers. 
Its  relative  value,  like  that  of  every  other  commodity,  rises  in  direct 
ratio  to  the  demand,  and  inverse  ratio  to  the  supply. 

The  wholesale  employers  of  industry,  or  adventurers,  as  they 
have  been  called,  are  but  a  kind  of  brokers  between  the  venders  and 
the  purchasers,  who  engage  a  quantum  of  productive  agency  upon  a 
particular  product,  proportionate  to  the  demand  for  that  product.* 
The  farmer,  the  manufacturer,  the  merchant,  is  constantly  occupied 
in  comparing  the  price,  which  the  consumer  of  a  given  product  will 
and  can  give  for  it,  with  the  necessary  charges  of  its  production ;  if 
that  comparison  determine  him  to  produce  it,  he  is  the  organ  of  a 
demand  for  all  the  productive  agency  applicable  to  this  object,  and 
thus  furnishes  one  of  the  bases  of  the  value  of  that  agency. 

On  the  other  hand,  the  agents  of  production,  animate  and  inani- 
mate, land,  capital,  and  human  labour,  are  supplied  in  larger  or 
smaller  quantity,  according  to  the  action  of  the  various  motives,  that 
will  be  detailed  in  the  succeeding  chapters ;  thus  forming  the  other 
bases  of  the  value  at  which  their  agency  is  rated.f 

Every  product,  when  co'mpleted,  repays  by  its  value  the  whole 
amount  of  productive  agency  employed  in  its  completion.  A  great 
part  of  this  agency  has  been  paid  for  before  the  entire  completion  of 
the  product,  and  must  have  been  advanced  by  somebody :  other  part 
has  been  remunerated  on  its  completion;  but  the  whole  is  always 
paid  for  ultimately  out  of  the  value  of  the  product. 

By  way  of  exemplifying  the  mode,  in  which  the  value  of  a  pro- 
duct is  distributed  amongst  all  that  have  concurred  in  its  produc- 
tion, let  us  take  a  watch,  and  trace  from  the  commencement,  the 
manner  in  which  its  smallest  parts  have  been  procured,  and  in  which 
their  value  has  been  paid  to  every  one  of  the  infinite  numbet  of 
concurring  producers. 

In  the  first  place  we  find,  that  the  gold,  copper,  and  steel,  used  in 
its  construction,  have  been  purchased  of  the  miner,  who  has  received 
in  exchange  for  these  products,  the  wages  of  labour,  interest  of  capi- 
tal, and  rent  paid  to  the  landed  proprietor. 

The  dealers  in  metal,  who  buy  of  the  original  producer,  re-sell  to 
those  engaged  in  watchmaking,  and  are  thus  reimbursed  their  ad- 
vance, and  paid  the  profits  of  their  business  into  the  bargain. 

*  It  has  been  already  seen,  that  the  demand  for  every  product  is  great,  in 
proportion  to  the  degree  of  its  utility,  and  to  the  quantity  of  other  products  pos- 
sessed by  others,  and  capable  of  being  given  in  exchange.  In  other  words,  the 
utility  of  an  object,  and  the  wealth  of  the  purchasers,  jointly  determine  the  extent 
of  the  demand. 

t  In  digesting  the  plan  of  this  work,  I  hesitated  for  a  long  time,  whether  or 
no  to  place  the  analysis  of  value  before  that  of  production ;  to  explain  the  nature 
of  the  quality  produced,  before  entering  upon  the  investigation  of  the  mode  of 
its  production.  But  it  appeared  to  me,  that  to  make  the  foundation  of  value 
intelligible,  it  was  necessary  to  have  a  previous  knowledge  of  wherein  the  cost 
of  production  consists ;  and  for  that  purpose  to  have  a  just  and  enlarged  :oncep- 
tionof  the  agents  of  production,  and  of  the  service  they  are  capable  of  yielding 


316  ON  DISTRIBUTION.  BOOK  II. 

The  respective  mechanics,  who  fashion  the  different  parts  whereof 
a  watch  is  composed,  sell  them'  to  the  watchmaker,  who,  in  paying 
them,  refunds  the  advance  of  their  previous  value,  together  with  the 
interest  upon  that  advance ;  and  pays,  besides,  the  wages  of  labour 
hitherto  incurred.  This  very  complex  operation  of  payment  may 
be  effected  by  a  single  sum,  equal  to  the  aggregate  of  those  united 
values.  In  the  same  way,  the  watchmaker  deals  with  the  me- 
chanics that  furnish  the  dial-plate,  the  glass,  &c.,  and  such  ornaments 
as  he  may  think  fit  to  add, — diamonds,  enamel,  or  any  thing  he 
pleases. 

Last  of  all,  the  individual  purchaser  of  the  watch  for  his  own  use 
refunds  to  the  watchmaker  the  whole  of  his  advances,  together  with 
interest  on  each  part  respectively,  and  pays  him  besides,  a  profit  on 
his  personal  skill  and  industry. 

We  find,  then,  that  the  total  value  of  the  watch  has  been  shared 
amongst  all  its  producers,  perhaps  long  before  it  was  finished ;  and 
those  producers  are  much  more  numerous  than  I  have  described  or 
than  is  generally  imagined.  Among  them,  probably,  may  be  found 
the  unconscious  purchaser  himself,  who  has  bought  the  watch,  and 
wears  it  in  his  fob.  For  who  knows  but  he  may  have  advanced  his 
own  capital  to  is.  mining  adventurer,  or  a  dealer  in  metal ;  or  to  the 
director  of  a  large  factory ;  or  to  an  individual  who  acts  himself  in 
none  of  these  capacities,  but  has  uhderlent  to1  one  or  more  such  per- 
sons a  part  of  the  funds  he  has  borrowed  at  interest  from  the  iden- 
tical consumer  of  the  watch  1 

It  has  been  observed,  that  it  is  by  no  means  necessary  for  a  pro- 
duct to  be  perfected  for  use,  before  the  majority  of  its  concurring 
producers  can  have  been  reimbursed  that  portion  of  value  they  have 
contributed  to  its  completion ;  in  a  great  many  cases,  these  producers 
have  even  consumed  their  equivalent  long  before  the  product  has 
arrived  at  perfection.  Each  successive  producer  makes  the  advance 
to  his  precursor  of  the  then  value,  of  the  product,  including  the 
labour  already  expended  upon  it.  His  successor  in  the  order  of 
production,  reimburses  him  in  turn,  with  the  addition  of  such  value 
as  the  product  may  have  received  in  passing  through  his  hands. 
Finally,  the  last  producer,  who  is  generally  the  retail  dealer,  is  com- 
pensated by  the  consumer  for  the  aggregate  of  all  these  advances, 
plus  the  concluding  operation  performed  by  himself  upon  the 
product. 

The  whole  revenues  of  the  community  are  distributed  in  one  and 
the  same  manner. 

That  portion  of  the  value  produced,  which  accrues  in  this  manner 
to  the  landed  proprietor,  is  called  the  profit  of  land;  which  is  some- 
times transferred  to  the  farmer,  in  consideration'of  a  fixed  rent. 

The  portion  assigned  to  the  capitalist,  or  person  making  the  ad- 
vances, however  minute  and  for  however  short  a  period  of  time,  is 
called  the  profit  nf  capital ;  which  capital  is  sometimes  lent,  and 
!he  profit  relinquished  on  condition  of  a  stipulated  interest. 

The  portion  assigned  to  the  mere  mechanic  or  labourer  is  called 


CBU-.  V,  ON  DISTRIBUTION.  317 

thp  profit  t,f  labour ;  which  is  sometimes  relinquished  for  certain 
tuages.* 

Thus,  each  class  receives  its  respective  share  of  the  total  value 
produced ;  ana  this  share  composes  its  revenue.  Some  classes  re- 
ceive their  snare  piecemeal,  and  consume  as  fast  as  they  receive 
it ;  and  these  are  the  most  numerous,  for  they  comprise  most  of  the 
labouring  classes.  The  land-holder  and  the  capitalist,  who  do  not 
themselves  turn  their  means  to  account,  receive  their  revenue  period- 
ically, once  or  twice,  or  perhaps  four  times  a  year,  according  to  the 
terms  of  the  contract  with  the  transferee.  But,  in  whatever  manner 
a  revenue  may  be  derived,  it  is  always  analogous  in  its  nature,  and 
must  oiiginate  in  actual  value  produced.  Whatever  value  an  indi- 
vidual receives  in  satisfaction  of  his  wants,  without  having  either 
directly  or  indirectly  concurred  in  production  of  some  kind  or  other, 
must  be  wholly  either  a  gratuitous  gift  or  a  spoliation;  there  is  no 
other  alternative. 

It  is  in  this  way,  that  the  total  value  of  products  is  distributed 
amongst  the  members  of  the  community;  I  say,  the  total  value, 
because  such  part  of  the  whole  value  produced,  as  does  not  go  to  one 
of  the  concurring  producers,  is  received  by  the  rest.  The  clothier 
buys  wool  of.  the  farmer,  pays  his  workmen  in  every  department, 
and  sells  the  cloth,  the  result  of  their  united  exertion,  at  a  price  that 
reimburses  all  his  advances,  and  affords  himself  a  profit.  He  never 
reckons  as  profit,  or  as  the  revenue  of  his  own  industry,  any  thing 
more  than  the  net  surplus,  after  deducting  all  charges  and  outgoing; 
but  those  outgoings  are  merely  an  advance  of  their  respective  reve- 
nues to  the  previous  producers,  which  are  refunded  by  the  gross 
value  of  the  cloth.  The  price  paid  to  the  farmer  for  his  wool,  is  the 
compound  of  the  several  revenues  of  the  cultivator,  the  shepherd, 
and  the  landlord.  Although  the  farmer  reckons  as  net  produce  only 
the  surplus  remaining  after  payment  of  his  landlord  and  his  servants 
in  husbandry,  yet  to  them  these  payments  are  items  of  revenue, — > 
rent  to  the  one,  and  wages  to  the  oiher ;  to  the  one,  the  revenue  of 
his  land,  to  the  other,  the  revenue  of  his  industry.  The  aggregate 
of  all  these  is  defrayed  out  of  the  value  of  the  cloth,  the  wholef  of 
which  forms  the  revenue  of  some  one  or  other,  and  is  entirely  ab- 
sorbed in  that  way. 

*  In  the  above  instance  of  the  watch,  many  of  the  artisans  are  themselves  the 
adventurers  in  respect  to  their  own  industry;  in  which  case  their  receipts  are 
profits,  not  wages.  If  the  maker  exclusively  of  the  chain  himself,  buys  the 
steel  in  its  rude  state,  works  it  up,  and  sells  the  chain  on  his  own  account,  he  is 
the  adventurer  in  respect  to  this  particular  part  of  the  manufacture.  A  flax- 
spinner  buys  a  few  penny-worth  of  flax,  spins  it,  and  converts  her  thread  into 
money.  Part  of  this  money  goes  to  the  purchase  of  more  flax;  this  is  hei  eap- 
ital ;  another  portion  is  spent  in  satisfying  her  wants ;  this  is  the  joint  profit  of 
her  industry  and  her  little  capital,  and  forms  her  revenue. 

f  Even  that  portion  of  the  gross  value,  which  is  absorbed  in  the  maintenance 
or  restoration  of  the  vested  capital  or  machinery.  If  his  works  need  repairs, 
which  are  executed  by  the  proper  mechanic,  the  sum  expended  in  them  forms 
the  revenue  of  that  mechanic,  and  is  to  the  clothier  a  simple  advance,  which  it 
refunded,  like  any  other,  by  the  value  of  the  product  when  completed. 

27* 


3l8  ON  DISTRIBUTION.  BOOK  U. 

Whence  it  appears,  that  the  term  net  produce  applies  only  to  the 
individual  revenue  of  each  separate  producer  or  adventurer  in 
industry;  but  that  the  aggregate  of  individual  revenue,  the  total 
revenue  of  the  community,  is  equal  to  the  gross  produce  of  its  land, 
capital,  and  industry.  Which  entirely  subverts  the  system  of  the 
economists  of  the  last  century,  who  considered  nothing  but  the  net 
produce  of  the  land  as  forming  revenue,  and  therefore  concluded 
that  this  net  produce  was  all  that  the  community  had  to  consume , 
instead  of  admitting  the  obvious  inference,  that  the  whole  of  what 
has  been  created,  may  also  be  consumed  by  mankind.* 

If  national  revenue  consisted  of  the  mere  excess  of  value  produced 
above  value  consumed,  this  most  absurd  consequence  would  be  ine- 
vitable, namely,  that,  where  a  nation  consumes  in  the  year  the  total 
of  its  annual  product,  it  will  have  no  revenue  whatever.  Is  a  man 
possessed  of  an  income  of  2000  dollars  a  year,  to  be  said  to  have  no 
revenue,  because  he  may  think  proper  to  spend  the  whole  of  it  ? 

The  whole  amount  of  profit  derived  by  an  individual  from 'his 
land,  capital,  and  industry,  within  the  year,  is  called  his  annual 
revenue.  The  aggregate  of  the  revenues  of  all  the  individuals, 
whereof  a  nation  consists,  is  its  national  revenue,  f  Its  sum  is  the 
gross  value  of  the  national  product,  minus  the  portion  exported ;  for 
the  relation  of  one  nation,  is  like  that  of  one  individual  to  another. 
The  profits  of  .an  individual  are  limited  to  the  excess  of  his  income 
above  his  expenditure,  which  expenditure,  indeed,  forms  the  reve- 
nue of  other  persons,  but,  if  those  persons  be  foreigners,  must  be 
reckoned  in  the  estimate  of  the  revenue  of  the  respective  nations 
they  may  belong  to.  Thus,  for  instance,  when  a  consignment  of 
ribbons  is  made  to  Brazil  to  the  amount  of  2000  dollars,  and  the 
returns  received  in  cotton,  in  estimating  the  resulting  product  to 
France  from  this  act  of  dealing,  the  export  made  to  Brazil  in  pay- 
ment of  the  cotton  must  be  deducted.  Supposing  the  investment  of 
-  ribbons  to  procure,  say  40  bales  of  cotton,  which,  when  they  reach 
France,  will  fetch  2400  dollars,*400  dollars  only  of  that  sum  will 
go  to  the  revenue  of  France,  and  the  residue  to  that  of  Brazil. 

Did  all  mankind  form  but  one  vast  nation  or  community,  it  would 
be  equally  true  in  respect  to  mankind  at  large,  as  to  the  internal  pro- 
duct of  each  insulated  nation,  that  the  whole  gross  value  of  the 
product  would  be  revenue.  But  so  long  as  it  shall  be  necessary  to 
consider  the  human  race  as  split  into  distinct  co.mmunities,  taking 

*  Part  of  the  value  created  is  due  to  natural  agency,  amongst  which  that  of 
land  is  comprised.  But,  as  stated  above  in  Book  I.,  land  is  treated  as  a  machine 
or  instrument,  and  its  appropriator  as  the  producer  that  sets  it  in  motion ;  in  like 
manner  as  the  productive  quality  of  capital  is  said  to  be  the  productive  quality 
of  the  capitalist  to  whom  it  belongs.  Mere  verbal  criticism  is  of  little  moment, 
when  once  the  meaning  is  explained ;  it  is  the  correctness  of  the  idea,  and  not 
of  the  expression,  that  is  material. 

t  The  term  national  revenue,  has  been  sometimes  incorrectly  applied  to  the 
financial  receipts  of  the  state.  Individuals,  indeed,  pay  their  taxes  out  of  their 
respective  revenues;  but  the  sum  levied  by  taxation  is  not  revenue,  but  rather  a 
»ax  upon  revenue,  and  sometimes  unhappily  upon  capital  too. 


CHAP.  V.  ON  DISTRIBUTION  319 

each  an  independent  interest,  this  circumstance  must  be  taken  into 
the  account.  Wherefore,  a  nation,  whose  imports  exceed  its  ex- 
ports in  value,  gains  in  revenue  to  the  extent  of  the  excess  ;  which 
excess  constitutes  the  profit  of  its  external  commerce.  A  nation 
that  should  export  to  the  value  of  20,000  dollars,  and  import  to  the 
value  of  24,000  dollars  wholly  in  goods,  without  any  money  passing 
on  either  side,  would  make  a  profit  of  4000  dollars,  in  direct  contra- 
diction to  the  theory  of  the  partizans  of  the  balance  of  trade.* 

The  voluminous  head  of  perishable  products  consumed  within  the 
year,  nay,  often  at  the  very  moment  of  production,  as  in  the  case  of 
all  immaterial  products,  is  nevertheless  an  item  of  national  revenue. 
For  what  are  they  but  so  many  values  produced  and  consumed  in 
the  satisfaction  of  human  wants,  which  are  the  sole  characteristics 
of  revenue  ? 

The  estimation  of  individual  and  of  national  revenue  is  made  in  the 
same  way,  as  that  of  every  collection  of  values,  under  whatever 
varieties  of  form  ;  as  of  the  estate  of  a  deceased  person.  Each  pro- 
duct is  successively  valued  in  money  or  coin.  For  instance,  the 
revenues  of  France  are  said  to  amount  to  1300  millions  of  dollars 
which  by  no  means  implies,  that  the  commerce  of  France  produces  a 
return  of  that  amount  in  specie.  Probably  a  very  small  amount  of 
specie,  or  none  at  all,  may  have  been  imported.  All  that  is  meant 
by  the  assertion  is,  that  the  aggregate  annual  products  of  the  nation, 
valued  separately  and  successively  in  silver  coin,  make  the  'total 
value  above  stated.  The  only  reason  of  making  the  estimate  in 
money  is,  the  greater  facility  acquired  by  habit  of  forming  an  idea 
of  the  unchangeable  value  of  a  specific  amount  of  money,  than  of 
other  commodities.  Were  it  not  for  that  facility,  it  would  be  quite 
as  well  to  make  the  estimate  in  corn ;  and  to  say,  that  the  revenues 
of  France  amounted  to  1,300,000,000  bushels  of  wheat,  which  at 
one  dollar  the  bushel,  would  make  precisely  the  same  amount. 

Money  facilitates  the  circulation  from  hand  to  hand  of  the  values 
composing  both  revenue  and  capital ;  but  is  itself  not  an  item  of 
annual  revenue,  not  being  an  annual  product,  but  a  product  of 
previous  commerce  or  metallurgy,  of  a  date  more  or  less  remote. 

The  same  coin  has  effected  the  circulation  of  the  former  year, 
possibly  of  the  former  century,  and  has  all  the  while  remained  the 
same  in  amount ;  nay,  if  the  value  of  its  material  have  declined  in 
the  interim,  the  nation  will  even  have  lost  upon  its  capital  existing 
under  the  form  of  money;  just  in  the  same  way  as  a  merchant 
would  lose  upon  the  fall  of  price  of  the  goods  in  his  warehouses. 

Thus,  although  the  greater  part  of  revenue,  that  is  to  say,  of  value 
produced,  is  momentarily  resolved  into  money,  the  money,  the 
quantity  of  silver  coin  itself,  is  not  what  constitutes  revence  ;  reve- 
nue is  value  produced,  wherewith  that  quantity  of  silver  coin  has 

*  Their  profit  arises  from  increase  of  value  effected  by  the  transport  upon 
Doth  the  export  and  the  import,  by  the  time  they  have  reached  their  destination 
espectively. 


32()  ON  DISTRIBUTION.  BOOK  II. 

been  bought ;  and,  as  that  value  assumes  the  form  of  money  but  for 
a  moment,  the  same  identical  pieces  of  money  are  made  use  of  many 
times  in  the  course  of  a  year,  for  the  purpose  of  paying  or  receiving 
specific  portions  of  revenue.  Indeed,  some  portions  of  revenue 
never  assume  the  form  of  money  at  all.  The  manufacturer,  that 
boards  his  workmen  himself,  pays  part  of  their  wages  in  food ;  su 
that  this  fai  greater  oortjon  of  the  mechanic's  revenue  is  paid, 
received,  and  consumed,  without  having  once  taken  the  shape  of 
money,  even  for  an  instant.  In  the  United  States  of  America,  and 
in  countries  similarly  circumstanced,  it  is  not  uncommon  for  the 
colonist  to  derive  from  the  produce  of  his  own  estate,  food,  lodging, 
and  raiment  for  the  whole  of  his  establishment;  receiving  and  con- 
suming his  whole  revenue  in  kind,  without  any  intervention  of 
money  whatsoever. 

I  think  I  have  said  enough  to  warn  the  reader  against  confound- 
ing the  money,  into  which  revenue  may  be  converted,  with  revenue 
itself;  and  to  establish  a  conviction  that  the  revenue  of  an  indivi- 
dual, or  of  a  nation,  is  not  composed  of  the  money  received  in  lieu 
of  the  products  of  his  or  their  creation,  but  is  the  actual  product  or 
its  value,  which,  by  a  process  of  exchange,  may  undoubtedly  arrive 
ut  its  destination  in  the  shape  of  a  bag  of  crown  pieces,  or  in  any 
tlier  shape  whatsoever. 

No  value,  whether  received  in  the  shape  of  money  or  otherwise, 
r,an  form  a  portion  of  annual  revenue,  unless  it  be  the  product,  or 
.ie  price  of  a  product,  created  within  the  year  :  all  else  is  capital, — 
s  property  passing  from  one  hand  to  another,  either  in  exchange,  as 
-.  gift,  or  by  inheritance.  For  an  item  of  capital,  or  one  of  revenue, 
nay  be  transferred  or  paid  any  bow,  whether  in  the  shape  of  per- 
:onal  or  real,  of  movcable  or  imrrjcveable  property,  or  of  money 
But,  no  matter  what  shape  it  assume,  revenue  differs  from  capital 
essentially  in  this,  that  it  is  the  result  or  product  of  a  pre-existing 
source,  whether  land,  capital,  or  industry.  . 

It  has  with  some  been  a  matter  of  doubt,  whether  the  same  value, 
which  has  already  been  received  by  one  individual  as  the  profit  or 
revenue  of  his  land,  capital,  or  industry,  can  constitute  the  revenue 
of  a  second.  For  instance,  a  man  receives  100  crowns  in  part  of 
his  personal  revenue,  and  lays  it  out  in  books;  can  this  item  of 
revenue,  thus  converted  into  books,  and  in  that  shape  destined  to  his 
consumption,  further  contribute  to  form  the  revenue  of  the  printer, 
bookseller,  and  all  the  other  concurring  agents  in  the  production  of 
the  books,  and  be  by  them  consumed  a  second  time?  The  difficulty 
may  be  solved  thus.  The  value  forming  the  revenue  of  the  first 
individual,  derived  from  his  land.  Capital,  or  industry,  and  by  him 
consumed  in  the  sfcape  of  books,  was  not  originally  produced  in  that 
form.  There  has  been  a  double  production:  1.  Of  corn  perhaps  by 
the  land  and  the  industry  of  the  farmer,  which  has  been  converted 
into  crown  pieces,  and  paid  as  rent  to  the  proprietor  :  2.  Of  books  by 
ihe  capital  and  industry  of  the  bookseller.  The  two  products  have 
been  subsequently  interchanged  one  for  the  other,  and  consumed 


CHAP.  VL  ON  DISTRIBUTION.  321 

each  by  the  producer  of  the  other:  having  arrived  at  the  particular 
form  adapted  to  their  respective  wants. 

So  likewise  of  immaterial  products.  The  opinion  of  the  lawyer, 
the  advice  of  the  physician,  is  tKs  product  of  their  respective  talents 
and  knowledge,  which  are  their  peculiar  productive  means.  If  the 
merchant  have  occasion  to  purchase  their  assistance,  he  gives  for  it 
a  commercial  product  of  his  own  converted  into  money.  Each  of 
them  ultimately  consumes  his  own  revenue  respectively,  transformed 
into  the  object  best  adapted  to  his  peculiar  occasions. 


CHAPTER  VI. 

OF  WHAT  BRANCHES  OF  PRODUCTION  YIELD  THE  MOST  LIBERAL  RECOMPENSE 
TO  PRODUCTIVE  AGENCV. 

THE  aggregate  value  of  a  product,  in  the  way  just  described, 
refunds  to  its  different  concurring  producers  the  amount  of  their 
advances,  with  the  addition  in  most  cases,  of  a  profit,  that  constitutes 
the;r  revenue.  But  the  profits  of  productive  agency  are  not  of  equal 
amount  in  all  its  branches;  some  yielding  but  a  very  scanty  revenue 
for  the  land,  capital,  or  industry,  embarked  in  them  ;  while  others 
give  tvn  exorbitant  return. 

True  it  is,  that  productive  agents  always  endeavour  to  direct  their 
agency  ..o  those  employments,  in  which  the  profits  are  the  greatest,  and 
thus,  by  their  competition,  have  as  much  tendency  to  lower  price,  as 
demand  Kas  to  raise  it ;  but  the  effects  of  competition  can  not  always 
so  nicely  proportion  the  supply  to  the  demand,  as  in  every  case  to 
ensure  an  equal  remuneration.  Some  kinds  of  labour  are  scantily 
supplied,  in  countries  where  people  are  not  accustomed  to  them ;  and 
capital  is  ofteh  so  sunk  in  a  particular  channel  of  production,  that  it 
can  never  be  transferred  to  any  other  from  that  wherein  it  was 
originally  embarked.  Besides,  the  land  may  stubbornly  resist  that 
kind  of  cultivation,  whose  products  are  in  the  greatest  demand. 

One  cannot  trace  the  fluctuation  of  profit  on  each  particular  occa- 
sion. A  wonderful  change  may  be  effected  by  a  new  invention,  a 
hostile  invasion,  or  a  siege.  Such  partial  circumstances  may  influence 
or  derange  the  operation  of  general  causes,  but  can  not  destroy  their 
general  tendency.  No  dissertation,  however  voluminous,  could  be 
made  to  embrace  every  individual  circumstance,  that  by  possibility 
may  influence  the  relative  value  of  objects ;  but  one  may  specify 
general  causes,  and  such  as  have  an  uniform  activity;  thereby 
enabling  every  one,  -when  the  particular  occasion  may  present  itself, 
to  estimate  the  effect  produced  by  the  operation  of  partial  and  Iran 
sient  circumstances. 

2Q 


322  ON  DISTRIBUTION.  BOOK  H 

It  may  appear  extraordinary  at  first  sight,  but  will  on  inquiry  be 
found  generally  true,  that  the.  largest  profit  is  made,  not  on  the 
dearest  commo'dities  or  upon  those  which  are  least  indispensable,  but 
rather  on  those,  which  are  the  most  common  and  least  to  be  dis- 
pensed with.  In  fact  the  demand  for  these  latter  is  necessarily  per- 
manent ;  for  it  is  stimulated  by  actual  want,  and  grows  with  every 
increase  of  the  means  of  production ;  inasmuch  as  nothing  tends  to 
increase  population  more,  than  providing  the  means  of  its  subsistence. 
The  demand  for  superfluities,  on  the  contrary,  does  not  expand  with 
the  increased  power  of  producing  them.  An  extraordinary  run, 
which,  by  the  way,  can  never  take  place  but  in  large  towns,  may 
raise  the  current  considerably  above  the  natural  price ;  that  is  to 
say,  above  the  actual  cost  of  production  ;  or  a  change  of  fashion 
may  again  depress  it  infinitely  below  that  point.  Superfluities 
are,  after  all,  but  objects  of  secondary  want  even  to  the  rich 
themselves ;  and  the  demand  for  them  is  limited  to  the  very 
small  number  of  persons  that  can  indulge  in  them.  When  a  casual 
calamity  obliges  individuals  to  reduce  their  expenditure,  when  their 
revenues  are  curtailed  by  the  ravages  of  war,  by  taxation,  or  by 
natural  scarcity,  the  first  items  of  retrenchment  are  always  the  arti- 
cles of  least  necessary  consumption.  And  this  may  serve,  perhaps, 
to  explain,  why  the  productive  agency  directed  to  the  raising  of 
superfluities,  is  "generally  worse  paid  than  that  otherwise  employed. 

I  say  generally,  for  it  is  possible  enough  that,  in  a  great  metropolis, 
where  the  demand  for  luxuries  is  more  urgent  than  elsewhere,  and 
the  dictates  of  fashion,  however  absurd,  more  implicitly  obeyed  than 
the  eternal  laws  of  nature ;  where  a  man  will,  perhaps,  be  content 
to  lose  his  dinner,  so  he  may  appear  in  the  evening  circle  in  embroi- 
dered ruffles,  it  is  possible,  that  in  such  a  place  the  price  of  the  gew- 
gaws may  sometimes  very  liberally  reward  the  labour  and  capital 
devoted  to  their  production.  But,  except  in  such  particular  ca^es, 
balancing  one  year's  profits  with  another,  and  allowing  for  contin- 
gent losses,  it  has  been  ascertained,  that  the  adventurers  in  the 
production  of  superfluities  make  the  most  scanty  profits,  and  that 
their  workmen  are  the  worst  paid.  The  manufacturers  of  the  finest 
laces  in  Normandy  and  Flanders  are  a  very  indigent  set  of  people; 
and  at  Lyons,  the  workers  of  gold-embroidery  are  absolutely  clothed 
in  rags.  Not  but  that  very  considerable  profits  have  occasionally 
been  derived  from  such  articles.  A  hat-maker  has  been  known  to 
make  a  fortune  by  a  fancy  hat ;  but,  taking  all  the  profits  made  on 
superfluities,  and  deducting  the  value  of  goods  remaining  unsold,  or, 
though  sold,  never  paid  for,  we  shall  find  that  this  class  of  products 
affords,  on  the  whole,  the  scantiest  profit.  The  most  fashionable 
tradesmen  are  oftenest  in  the  list  of  bankrupts. 

Commodities  of  general  use  are  attainable  by  a  greater  number  of 
persons,  and  are  in  demand  with  almost  every  class  of  society.  The 
i.handelier  is  to  be  found  only  in  the  mansions  of  the  rich  ;  but  the 
meanest  cottage  is  furnished  with  the  convenience  of  a  candlestick : 


CHAP.  VI.  ON  DISTRIBUTION.  333 

the  demand  for  candlesticks  is,  therefore,  regular,  and  always  more 
brisk  than  that  for  chandeliers;  and,  even  in  the  most  opulent  coun- 
try, the  total  value  of  the  candlesticks  is  far  greater  than  that  of  the 
chandeliers. 

The  articles  of  human  food  are  unquestionably  those  of  most 
indispensable  use;  the  demand  for  them  recurs  daily  ;  and  no  occu- 
pations are  so  regular  as  those  which  minister  to  human  sustenance. 
Wherefore,  it  is  they  that  yield  the  most  certain  profit,  notwithstand- 
ing the  effects  of  brisk  competition.*  The  butchers,  bakers,  and 
porkmen,  of  Paris,  are  pretty  sure  to  retire  with  a  fortune  sooner  or 
later;  indeed,  I  have  it  from  pretty  good  authority  in  such  matters, 
that  half  the  houses  and  real  property  sold  in  Paris  and  the  environs, 
is  bought  up  by  tradesmen  in  those  lines. 

It  is  on  this  account,  that  individuals  and  nations,  who  understand 
their  true  interest,  unless  they  have  very  cogent  reasons  for  acting 
otherwise,  apply  themselves  in  preference  to  the  production  of  what 
tradesmen  call  current  articles.  Mr.  Eden,  who,  in  1706,  negotiated 
on  the  part  of  Great  Britain  the  treaty  of  commerce  concluded  by 
M.  de  Vergennes,  went  upon  this  principle,  in  stipulating  the  free 
import  of  the  common  English  earthenware  into  France.  "  The  few 
dozens  of  plates  we  may  sell  you,"  said  the  English  agent,  "  will  be 
a  poor  set-off  against  the  magnificent  services  of  Sevres  porcelain  we 
shall  take  of  you."  This  appeal  to  the  vanity  of  the  French  agent 
was  decisive.  But,  as  soon  as  the  English  earthenware  was  admit- 
ted, its  lightness,  cheapness,  convenience  and  simplicity  of  form, 
recommended  it  to  the  most  moderate  establishments;  its  regular 
import,  in  a  short  time,  amounted  to  many  millions,  and  continued 
increasing  every  year  until  the  war.  The  exportation  of  Sevres 
china,  was  a  mere  trifle  in  comparison. 

The  scale  for  current  articles,  besides  being  more  considerable,  is 
likewise  more  steady.  A  tradesman  is  never  long  in  disposing  of 
common  linen  shirting. 

The  examples  I  have  selected  from  the  class  of  manufacture  might 
easily  be  paralleled  in  the  agricultural  and  commercial  branches.  A 
much  larger  value  is  Consumed  in  lettuces  than  in  pine-apples, 
throughout  Europe  at  large ;  and  the  superb  shawls  of  Cachemere 
are,  in  France,  a  very  poor  object  in  trade,  in  comparison  with  the 
plain  cotton  goods  of  Rouen. 

Wherefore,  it  is  a  bad  speculation  for  a  nation  to  aim  at  the  export 
of  objects  of  luxury,  and  the  import  of  objects  of  general  utility. 
France  supplies  Germany  with  fashions  and  finery,  which  very  few 
persons  can  make  use  of;  and  Germany  makes  the  return  in  tapes 

*  I  speak  here  of  the  adventurers,  masters,  or  tradesmen ;  the  mere  labourer 
or  journeyman  benefits  only,  as  it  were,  by  re-action.  The  farmer,  who  is  an 
adventurer  in  agriculture,  employed  in  raising  products  for  human  sustenance, 
lies  under  disadvantages,  that  very  much  curtail  his  profits.  His  concerns  are 
too  much  at  the  mercy  of  his  landlord,  and  of  the  financial  exactions  of  public 
authority,  to  say  nothing  of  the  vicissitudes  of  seasons,  to  be  very  gainful  DD 
the  average. 


324  ON  DISTRIBUTION.  BOOK  II. 

and  other  merceries,  in  files,  scythes,  shovels,  tongs,  and  other  hard- 
ware of  common  use.  But  for  the  wines  and  oils  of  France,  the 
annual  product  of  a  soil  highly  favoured  by  nature,  together  with  a 
few  products  of  superior  execution,  France  would  derive  less  ad- 
vantage from  Germany  than  Germany  from  France.  The  same 
may  be  said  of  the  French  trade  with  the  north  of  Europe.  (,) 


CHAPTER  VH. 

OF  THE  REVENUE  OF  INDUSTRY 

SECTION  I. 
Of  the  Profits  of  Industry  in  general. 

THE  general  motives,  which  stimulate  the  demand  of  products, 
have  been  above  investigated.*  When  the  demand  for  any  product 
whatever,  is  very  lively,  the  productive  agency,  through  whose 
means  alone  it  is  obtainable,  is  likewise  in  brisk  demand,  which 
necessarily  raises  its  ratio  of  value:  this  is  true  generally,  of  every 
kind  of  productive  agency.  Industry,  capital,  and  land,  all  yield, 
ceteris  paribus,  the  largest  profits^  when  the  general  demand  for 
products  is  most  active,  affluence  most  expanded,  profits  most  wide- 
ly diffused,  and  production  most  vigorous  and  prolific. 

In  the  preceding  chapter,  we  have  seen  that  the  demand  for  some 
products  is  always  more  steady  and  active  than  for  others.  Whence, 
we  have  inferred,  that  the  agency  directed  to  those  particular  pro- 
ducts, receives  the  most  ample  remuneration. 

Descending  in  our  progress  more  and  more  into  particular  detail, 

*  Book  I,  c.  15. 

(a)  The  reasoning  of  this  whole  chapter  is  superfluous  and  inconclusive. 
Where  value  is  left  to  find  its  natural  level,  one  class  of  productive  agency 
will,  in  the  long  run,  be  equally  recompensed  with  another,  presenting  an  equi- 
poise of  facility  or  difficulty,  of  repute  or  disrepute,  of  enjoyment  or  suffering,  in 
the  general  estimation  of  mankind  ;  this  he  states  fully  in  the  next  chapter.  If 
our  author  means  here  to  say  merely,  that  a  large  class  of  productive  agency  will 
receive  a  larger  portion  of  the  general  product  as  its  recompense  or  revenue,  or 
that  agency  in  permanent  employ  will  obtain  a  regular  and  permanent  recom- 
pense, he  has  taken  a  very  circuitous  mode  of  expressing  a  position,  which  is, 
vndeed,  almost  self-evident.  The  grand  division  of  productive  agency  is  into 
t-nrporeal  and  intellectual ;  whereof  the  former  is,  on  the  average,  the  more 
amply  rewarded  by  the  rest  of  mankind,  because  the  latter,  in  some  measure, 
rewards  itself.  -Thus,  the  profits  of  printing  and  bookselling  are,  on  the  whole, 
tnorejiberal  than  those  of  authorship;  because  the  latter  is  partly  paid  in  wif 
gratification,  in  vanity  or  conscious  merit.  T. 


CHAP.  VII.  ON  DISTRIBUTION.  325 

we  shall  examine  in  this,  and  some  following  chapters,  in  what  cases 
the  profits  of  industry  bear  a  greater  or  a  less  proportion  to  those  of 
capital  and  of  land,  and  vice  versa  ;  together  with  the  reasons  why 
certain  ways  of  employing  industry,  capital,  or  land,  are  more  profit- 
able than  others. 

To  begin,  then,  with  the  comparison  of  the  relative  profits  of  in- 
dustry, to  those  of  capital  and  land,  we  shall  find  these  bear  the 
highest  ratio,  where  abundance  of  capital  creates  a  demand  for  a 
great  mass  of  industrious  agency ;  as  it  did  in  Holland  before  the 
revolution.  Industrious  agency  was  very  dearly  paid  there  ;  as  it 
still  is  in  countries  like  the  United  States  of  America,  where  popu- 
lation, and  consequently,  the  human  agents  of  production,  spite  of 
their  rapid  increase,  bear  no  proportion  to  the  demands  of  an  unli- 
mited extent  of  land,  and  of  the  daily  accumulation  of  capital  by  the 
prevalence  of  frugal  habits. 

In  countries  thus  circumstanced,  the  condition  of  man  is  generally 
the  most  comfortable ;  because  those,  who  live  in  idleness  upon  the 
profits  of  their  capital  and  land,  are  better  able  to  live  on  moderate 
profits,  than  those  who  live  upon- the  profits  of  their  own  industry 
only;  the  former,  besides  the  resource  of  living  on  their  capital,  can, 
when  they  please,  add  the  profits  of  industry  to  their  other  revenue ; 
but  the  mere  mechanic  or  labourer  can  not  add  at  pleasure  to  the 
profits  of  his  industry  those  of  capital  and  land,  of  which  he  possesses 
none. 

Proceeding  next  to  compare  the  profits  of  different  branches  of 
industrious  agency  one  with  another,  we  shall  find  them  greater  or 
less  in  proportion,  1st,  To  the  degree  of  danger,  trouble,  or  fatigue, 
attending  them,  or  to  their  being  more  or  less  agreeable ;  2dly,  1o 
the  regularity  or  irregularity  of  the  occupation ;  3dly,  To  the  degree 
of  skill  or  talent  that  may  be  requisite. 

Every  one  of  these  causes  tends  to  diminish  the  quantity  of  labour 
in  circulation  in  each  department,  and  consequently  to  vary  its  natu- 
ral rate  of  profit.  It  is  scarcely  necessary  to  cite  examples  in  support 
of  propositions  so  very  evident. 

Among  the  agreeable  or  disagreeable  circumstances  attending  an 
occupation,  must  be  reckoned  the  consideration  or  contempt  which 
it  entails.  Some  professions  are  partly  paid  in  honour.  Of  any 
given  price,  the  more  is  paid  in  this  coin,  the  less  may  be  paid  in 
any  other,  without  deducing  the  ratio  of  price.  Smith  remarks, 
that  the  scholar,  the  poet,  and  the  philosopher,  are  almost  wholly 
paid  in  personal  consideration. — Whether  with  reason  or  from  pre- 
judice, this  is  not  entirely  the  case  with  the  professions  of  a  comic 
actor,  a  dancer,  and  innumerable  others;  they  must,  theiefore,  be 
paid  in  money  what  they  are  denied  in  estimation.  "  It  seems 
absurd  at  first  sight,"  says  Smith,  "that  we  should  despise  their 
persons,  and  yet  reward  their  talents  with  the  most  profuse  liberality 
\V  hilst  we  do  the  one,  however,  we  must  of  necessity  do  the  othei 
Should  the  public  opinion  or  prejudice  ever  alter  with  regard  to  such 
occupations,  their  pecuniary  recompense  would  quickly  diminish- 
28 


326  ON  DISTRIBUTION.  BOOK  II. 

More  people  would  apply  to  them,  and  the  competition  would 
quickly  reduce  the  price  of  their  labour.  Such  talents,  though  far 
from  being  common,  are  by  no  means  so  rare  as  is  imagined.  Many 
people  possess  them  in  great  perfection,  who  disdain  to  make  this 
use  of  them ;  and  many  more  are  capable  of  acquiring  them,  if  any 
thing  could  be  honourably  made  by  them."* 

In  some  countries,  the  functions  of  national  administration  are 
requited  at  the  same  time  with  high  honour  and  large  emolument ; 
but  it  is  only  so,  where,  instead  of  being  open  to  free  competition, 
like  other  occupations  and  professions,  they  are  in  the  disposal  of 
royal  favour.  A  nation,  awake  to  its  true  interest,  is  careful  not  to 
lavish  this  double  recompense  upon  official  mediocrity ;  but  to 
husband  its  pecuniary  bounty,  wrhere  it  is  prodigal  of  distinction  and 
authority. 

Every  temporary  occupation  is  dearly  paid ;  for  the  labourer  must 
be  indemnified  as  well  for  the  time  he  is  employed,  as  for  that 
during  which  he  is  waiting  for  employment.  A  job  coachmaster 
must  charge  more  for  the  days  he  is  employed,  than  may  appear 
sufficient  for  his  trouble  and  capital  embarked,  because  the  busy 
days  must  pay  for  the  idle  ones ;  any  thing  else  would  be  ruin  to 
him.  The  hire  of  masquerade  dresses  is  expensive  for  the  same 
reason ;  the  receipts  of  the  carnival  must  pay  for  the  whole  year. 
Upon  a  cross  road,  an  innkeeper  must  charge  high  for  indifferent 
entertainment;  for  he  may  he  some  days  before  the  arrival  of 
another  traveller. 

However,  the  proneness  of  mankind  to  expect,  that,  if  there  be 
a  single  lucky  chance,  it  will  be  sure  to  fall  to  their  peculiar  lot, 
attracts  towards  particular  channels  a  portion  of  industry  dispropor- 
tionate to  the  profit  they  hold  out.  '  In  a  perfectly  fair  lottery,' 
says  the  author  of  the  Wealth  of  Nations,  '  those  who  draw  prizes 
ought  to  gain  all  that  is  lost  by  those  who  draw  blanks.  In  a  pro- 
fession, where  twenty  fail  for  one  that  succeeds,  that  one  ought  to 
gain  all  that  should  have  been  gained  by  the  unsuccessful  twenty. 'f 
Now  many  occupations  are  far  from  being  paid  according  to  this 
rate.  The  same  author  states  his  belief,  that,  how  extravagant 
soever  the  fees  of  counsellors  at  law  of  celebrity  may  appear,  the 
annual  gains  of  all  the  counsellors  of  a  large  town  bear  but  a  very 
small  proportion  to  their  annual  expense;  so  that  this  profession, 
must,  in  great  part,  derive  its  subsistence  from  some  other  indepen- 
dent source  of  revenue. 

It  is  hardly  necessary  to  state,  that  these  several  causes  of  differ- 
ence in  the  ratio  of  profit  may  act  all  in  the  same,  or  each  in  an 
opposite  direction ;  or  that,,  in  the  former  case,  the  effect  is  more 
intense ;  whereas,  in  the  latter,  the  opposite  action  of  one  controls 
and  neutralizes  the  other.  It  would  be  a  waste  of  time  to  prove, 
Inat  the  agreeable  circumstances  of  a  profession  may  balance  the 
uncertainty  of  its  product :  or  that  a  business  that  does  not  furnish 

*  Wealth  of  Nations,  book  i.  c.  10.  t  Ibid. 


CHAP.  VII.  ON  DISTRIBUTION.  327 

constant  occupation,  and  is  moreover  attended  with  danger,  must  be 
indemnified  by  a  double  increase  of  salary. 

The  last,  and  perhaps  the  principal  cause  of  inequality  in  the  pro- 
fits of  industry  in  general  is,  the  degree  of  skill  it  may  require. 

When  the  skill  requisite  to  any  calling,  whether  of  a  superior 
or  subordinate  character,  is  attainable  only  by  long  and  expensive 
training,  that  training  must  every  year  have  involved  a  certain 
expense,  and  the  total  outlay  forms  an  accumulated  capital.  In  such 
case,  its  remuneration  includes,  over  and  above  the  wages  of  labour, 
an  interest  upon  the  capital  advanced  in  the  training,  and  an  interest 
higher  than  the  ordinary  rate ;  for  the  capital  advanced  has  been 
actually  sunk,  and  exists  no  longer  than  the  life  of  the  individual.  It 
should,  therefore,  be  calculated  as  an  annuity.* 

It  is  for  this  reason,  that  all  employments  of  time  and  talents, 
which  require  a  liberal  education,  are  better  paid  than  those,  which 
require  less  education.  Education  is  capital  which  ought  to  yield 
interest,  independent  of  the  ordinary  profits  of  industry. 

There  are  facts,  it  is  true,  that  militate  against  this  principle ;  but 
they  are  capable  of  explanation.  The  priesthood  is  sometimes  very 
ill  paid  ;f  yet  a  religion,  founded  upon  very  complicated  doctrines, 
and  obscure  historical  facts,  requires  in  its  ministers  a  long  course  of 
study  and  probation,  and  such  study  and  probation  necessarily  call 
for  an  advance  of  capital;  it  would  seem  requisite,  therefore,  for  the 
continued  existence  of  the  clerical  profession,  that  the  salary  of  the 
minister  should  pay  the  interest  on  the  capital  expended,  as  well  as 
the  wages  of  his  personal  trouble,  which  the  profits  of  the  inferior 
clergy  rarely  exceed,  particularly  in  Catholic  countries.  It  must, 
however,  be  ascertained,  whether  the  public  have  not  themselves 
advanced  this  capital  in  the  maintenance  and  education  of  clerical 
students  at  the  public  charge ;  in  which  case,  the  public  advancing 
the  capital,  may  find  people  enough  to  execute  the  duties  for  the 
mere  wages  of  their  labour,  or  a  bare  subsistence,  especially  where 
there  is  no  family  to  be  provided  for. 

*  Nay,  even  more  than  annuity  interest  on  the  sums  spent  in  the  education  of 
the  person  who  receives  the  salary ;  strictly  speaking,  it  should  be  annuity  inter- 
est upon  the  total  sum  devoted  to  the  same  class  of  study,  whether  it  have  or 
have  not  been  made  productive  in  its  kind.  Thus  the  aggregal^  of  the  fees  of  a 
physician  ought  to  replace  not  only  what  has  been  spent  in  their  studies,  but, 
in  addition,  all  the  sums  expended  in  the  instruction  of  the  students,  who  may 
have  died  during  their  education,  or  whose  success  may  not  have  repaid  the 
care  bestowed  upon  them ;  for  the  stock  of  medical  industry  in  actual  existence 
could  never  have  been  reared,  without  the  loss  of  some  part  of  the  outlay  devoted 
to  medical  instruction.  However,  there  is  little  use  in  too  minute  attention  to 
accuracy  in  the  estimates  of  political  economy,  which  are  frequently  found  at 
variance  with  fact,  on  account  of  the  influence  of  moral  considerations  in  the 
matter  of  national  wealth,  an  influence  that  does  not  admit  of  mathematical  esti- 
mation. The  forms  of  algebra  are  therefore  inapplicable  to  this  science,  and 
serve  only  to  introduce  unnecessary  perplexity.  Smith  has  not  once  had  recourse 
to  them. 

1 1  do  not  mean  to  include  the  superior  orders  of  the  clergy,  whose  benefice* 
are  extremely  rich  and  well  paid,  though  upon  principles  of  state  policy. 


328  ON  DISTRIBUTION.  BOOK  H 

When,  besides  expensive  training,  peculiar  natural  talent  is 
required  for  a  particular  branch  of  industry,  the  supply  is  still  more 
limited  in  proportion  to  the  demand,  and  must  consequently  be  bet- 
ter paid.  A  great  nation  will  probably  contain  but  two  or  three 
artists  capable  of  painting  a  superior  picture,  or  modelling  a  beau- 
tiful statue ;  if  such  objects,  then,  be  much  in  demand,  those  few  can 
charge  almost  what  they  please ;  and,  though  much  of  the  profit  is 
but  the  return  with  interest  of  capital  advanced  in  the  acquisition  of 
their  art,  yet  the  profit  it  brings  leaves  a  very  large  surplus,  (a)  A 
celebrated  painter,  advocate,  or  physician,  will  have  spent,  of  his 
own  or  relations'  money,  six  or  eight  thousand  dollars  at  most,  in 
acquiring  the  ability  from  which  his  gains  are  derived ;  the  interest 
of  this  sum  calculated  as  aa  annuity,  is  but  800  dollars;  so  that,  if  he 
make  6000  dollars  by  his  art,  there  remains  an  annual  sum  of  3000 
dollars,  which  is  wholly  the  salary  of  his  skill  and  industry.  If 
every  thing  affording  revenue  is  to  be  set  down  as  property,  his  for- 
tune at  ten  years'  purchase  may  be  reckoned  50,000  dollars,  even 
supposing  him  not  to  have  inherited  a  sol. 


SECTION  II. 

y  the  Profits  of  the  Man  of  Science. 

The  philosopher,  the  man  who  makes  it  his  study  to  direct  the 
laws  of  nature  to  the  greatest  possible  benefit  of  mankind,  receives 
a  very  small  proportion  of  the  products  of  that  industry,  which 
derives  such  prodigious  advantage  from  the  knowledge,  whereof  he 
is  at  the  same  time  the  depository  and  the  promoter.  The  cause  of 
his  disproportionate  payment  seems  to  be,  that,  to  speak  technically, 
he  throws  into  circulation,  in  a  moment,  an  immense  stock  of  his 
product,  which  is  one  that  suffers  very  little  by  wear ;  so  that  it  is 
long  before  operative  industry  is  obliged  to  resort  to  him  for  a  fresh 
supply. 

The  scientific  acquirements,  without  which  abundance  of  manu- 
facturing processes  could  never  have  been  executed,  are  probably 
the  result  of  long  study,  intense  reflection,  and  a  course  of  experi- 
ments equally  ingenious  and  delicate,  that  are  the  joint  occupation 
of  the  highest  degree  of  chemical,  medical,  and  mathematical  skill 
But  the  knowledge,  acquired  with  so  much  difficulty,  is  probably 
transmissible  in  a  few  pages ;  and,  through  the  channel  of  public  lee- 

(a)  From  which,  however,  is  to  be  deducted  the  average  loss  on  the  general 
balance  of  less  successful  competitors  in  the  same  line.  It  does  not  appear, 
that,  in  England  at  least,  any  allowance  is  to  be  made  for  personal  consideration, 
which  is  seldom  attached  in  a  high  ratio  even  to  the  greatest  excellence  in  the 
department  of  pure  art.  There  is  no  instance  of  a  sculptor  or  a  painter  arriving 
»t  the  honours  of  the  peerage,  which  have  been  placed  within  the  reach  of  suc- 
cessful commercial  enterprise.  T. 


CHAP.  VIL  ON  DISTRIBUTION.  329 

tures,  or  of  the  press,  is  circulated  in  much  greater  abundance,  than 
is  required  for  consumption;  or,  rather,  it  spreads  of  itself,  and, 
being  imperishable,  there  is  never  any  necessity  to  recur  to  those, 
from  whom  it  originally  emanated. 

Thus,  according  to  the  natural  laws,  whereby  the  price  of  things 
is  determined,  this  superior  class  of  knowledge  will  be  very  ill  paid; 
that  is  to  say,  it  will  receive  a  very  inadequate  portion  of  the  value 
of  the  product,  to  which  it  has  contributed.  It  is  from  a  sense  of 
this  injustice,  that  every  nation,  sufficiently  enlightened  to  conceive 
the  immense  benefit  of  scientific  pursuits,  has  endeavoured,  by  spe- 
cial favours  and  flattering  distinctions,  to  indemnify  the  man  of  sci- 
ence, for  the  very  trifling  profit  derivable  from  his  professional  occu- 
pations, and  from  the  exertion  of  his  natural  or  acquired  faculties. 

Sometimes  a  manufacturer  discovers  a  process,  calculated  either 
to  introduce  a  new  product,  to  increase  the  beauty  of  an  old  one,  or 
to  produce  with  greater  economy;  and,  by  observance  of  strict 
secrecy,  may  make  for  many  years,  for  his  whole  life  perhaps,  or 
even  bequeath  to  his  children,  profits  exceeding  the  ordinary  ratio  of 
his  calling.  In  this  particular  case  the  manufacturer  combines  two 
different  operations  of  industry:  that  of  the  man  of  science,  whose 
profit  he  engrosses  himself,  and  that  of  the  adventurer  too.  But  few 
such  discoveries  can  long  remain  secret;  which  is  a  fortunate  cir- 
cumstance for  the  public,  because  this  secrecy  keeps  the  price  of  the 
particular  product  it  applies  to  above,  and  the  number  of  con- 
sumers enabled  to  enjoy  it  below,  the  natural  level.*  , 

It  is  obvious,  that  I  am  speaking  only  of  the  revenue  a  man  of 
science  derives  from  his  calling.  There  is  nothing  to  prevent  his 
being  at  the  same  time  a  landed  proprietor,  capitalist  or  adventurer 
and  possessed  of  other  revenue  in  these  different  capacities. 


SECTION  III. 
Of  the  Profits  of  the  Master-agent,  or  Adventurer,  in  Industry. 

We  shall,  in  this  section,  consider  only  that  portion  of  the  profits 
of  the  master-agent,  or  adventurer,  which  may  be  considered  as  the 
recompense  of  that  peculiar  character.  If  a  master-manufacturer 
have  a  share  in  the  capital  embarked  in  his  concern,  he  must  be 
ranked  pro  tanto  in  the  class  of  capitalists,  and  the  benefits  thence 
derived  be  set  down  as  part  of  the  profits  of  the  capital  so  em- 
barked.f 

*  Such  of  my  readers  as  may  imagine,  that  the  sum  of  the  production  of  a 
country  is  greater,  when  the  scale  of  price  is  unnaturally  high,  are  requested  to 
refer  to  what  has  been  said  on  the  subject,  supra,  Chap.  3,  of  this  Book. 

t  Smith  is  greatly  embarrassed  by  his  neglect  of  the  distinction  between  the 

profits  of  superintendency,  and  those  of  capital.     He  confounds  them  under  the 

general  head  of  profits  of  stock ;  and  all  his  sagacity  and  acuteness  have  scarcely 

been  sufficient  to  expound  the  causes,  which  influence  their  fluctuations.   Wcal'k 

28*  2R 


330  ON  DISTRIBUTION.  BOOK  II. 

It  very  seldom  happens,  that  the  party  engaged  in  the  manage- 
ment of  any  undertaking,  is  not  at  the  same  time  in  the  receipt  of 
interest  upon  some  capital  of  his  own.  The  manager  of  a  concern 
rarely  borrows  from  strangers  the  whole  of  the  capital  employed. 
If  he  have  but  purchased  some  of  the  implements  with  his  own  capi- 
tal, or  made  advances  from  his  own  funds,  he  will  then  be  entitled 
to  one  portion  of  his  revenue  in  quality  of  manager,  and  another  in 
that  of  capitalist.  Mankind  are  so  little  inclined  to  sacrifice  any  par 
tide  of  their  self-interest,  that  even  those,  who  have  never  analyzed 
these  respective  rights,  know  well  enough  how  to  enforce  them  to 
their  full  extent  in  practice. 

Our  present  concern  is,  to  distinguish  the  portion  of  revenue, 
which  the  adventurer  receives  as  adventurer.  We  shall  see  by 
and-by,  what  he,  or  somebody  else,  derives  in  the  character  of 
capitalist  '  '.>••' 

It  may  be  remembered,  that  the  occupation  of  adventurer  is  com- 
prised in  the  second  class  of  operations  specified  as  necessary  for  the 
setting  in  motion  of  every  class  of  industry  whatever;  that  is  to  say, 
the  application  of  acquired  knowledge  to  the  creation  of  a  product 
for  human  consumption.*  It  will  likewise  be  recollected,  that  such 
application  is  equally  necessary  in  agricultural,  manufacturing,  and 
commercial  industry ;  that  the  labour  of  the  farmer  or  cultivator  on 
nis  own  account,  of  the  master-manufacturer  and  of  the  merchant,  all 
come  under  this  description;  they  are  the  adventurers  in  each  de- 
partment of  industry  respectively.  The  nature  of  the  profits  of 
these  three  classes  of  men,  is  what  we  are  now  about  to  consider. 

The  price  of  their  labour  is  regulated,  like  that  of  all  other  objects, 
by  the  ratio  of  the  supply,  or  quantity  of  that  labour  thrown  into 
circulation,  to  the  demand  or  desire  for  it.  There  are  two  principal 
causes  operating  to  limit  the  supply,  which,  consequently,  maintain 
at  a  high  rate  the  price  of  this  superior  kind  of  labour. 

It  is  commonly  requisite  for  the  adventurer  himself  to  provide  the 
necessary  funds.  Not  that  he  must  be  already  rich ;  for  he  may 
work  upon  borrowed  capital ;  but  he  must  at  least  be  solvent,  and 
'have  the  reputation  of  intelligence,  prudence,  probity,  and  regular- 
ity ;  and  must  be  able,  by  the  nature  of  his  connexions,  to  procure 
the  loan  of  capital  he  may  happen  himself  not  to  possess.  These 
requisites  shut  out  a  great  many  competitors. 

In  the  second  place,  this  kind  of  labour  requires  a  combination  of 
moral  qualities,  that  are  not  often  found  together.  Judgment,  per- 
severance, and  a  knowledge  of  the  world,  as  well  as  of  business. 
He  is  called  upon  to  estimate,  with  tolerable  accuracy,  the  import- 
ance of  the  specific  product,  the  probable  amount  of  the  demand,  and 
the  means  of  its  production:  at  one  time  he  must  employ  a  great 

of  Nations,  book  i.  c.  8.    And  no  wonder  he  found  himself  thus  perplexed;  their 
value  is  regulated  upon  entirely  different  principles.     The  profits  of  labour  de- 
yend  upor  the  degree  of  skill,  activity,  judgment,  &c.  exerted ;  those  of  capital, 
on  the  abundance  or  scarcity  of  capital,  the  security  of  the  investment,  &c. 
*  Vide  supra,  Book  I.  chap.  6. 


CHAP.  VII.  ON  DISTRIBUTION.  331 

number  of  hands ;  at  another,  buy  or  order  the  raw  material,  collect 
labourers,  find  consumers,  and  give  at  all  times  a  rigid  attention  to 
order  and  economy;  in  a  word,  lie  must  possess  the  art  of  superin- 
tendence and  administration.  He  must  have  a  ready  knack  of  cal- 
culation, to  compare  the  charges  of  production  with  the  probable 
value  of  the  product  when  completed  and  brought  to  market.  In 
the  course  of  such  complex  operations,  there  are  abundance  of 
obstacles  to  be  surmounted,  of  anxieties  to  be  repressed,  of  misfor- 
tunes to  be  repaired,  and  of  expedients  to  be  devised.  Those  who 
are  not  possessed  of  a  combination  of  these  necessary  qualities,  are 
unsuccessful  in  their  undertakings ;  their  concerns  soon  fall  to  the 
ground,  and  their  labour  is  quickly  withdrawn  from  the  stock  in 
circulation ;  leaving  such  only,  as  is  successfully,  that  is  to  say, 
skilfully  directed.  Thus,  the  requisite  capacity  and  talent  limit 
the  number  of  competitors  for  the  business  of  adventurers.  Nor  is 
this  all:  there  is  always  a  degree  of  risk  attending  such  undertak: 
ings;  however  well  they  may  be  conducted,  there  is  a  chance  of 
failure ;  the  adventurer  may,  without  any  fault  of  his  own,  sink  his 
fortune,  and  in  some  measure  his  character ;  which  is  another  check 
to  the  number  of  competitors,  that  also  tends  to  make  their  agency 
so  much  the  dearer. 

All  branches  of  industry  do  not  require  an  equal  degree  of  capa- 
city and  knowledge.  A  farmer  who  adventures  in  tillage,  is  not 
expected  to  have  such  extensive  knowledge  as  a  merchant,  who 
adventures  in  trade  with  distant  countries.  The  farmer  may  do 
well  enough  with  a  knowledge  of  the  ordinary  routine  of  two  or 
three  kinds  of  cultivation.  But  the  science  necessary  for  conduct- 
ing a  commerce  with  long  returns  is  of  a  much  higher  order.  It  is 
necessary  to  be  well  versed,  not  only  in  the  nature  and  quality  of 
the  merchandise  in  which  the  adventure  is  made,  but  likewise  to 
have  some  notion  of  the  extent  of  demand,  and  of  the  markets 
whither  it  is  consigned  for  sale.  For  this  purpose,  the  trader  must 
be  constantly  informed  of  the  price-current  of  every  commodity  in 
different  parts  of  the  world.  To  form  a  correct  estimate  of  these 
prices,  he  must  be  acquainted  with  the  different  national  currencies, 
and  their  relative  value,  or,  as  it  is  termed,  the  rate  of  exchange. 
He  must  know  the  means  of  transport,  its  risk  and  expense,  the  cus- 
tom and  laws  of  the  people  he  corresponds  with ;  in  addition  to  all 
which,  he  must  possess  sufficient  knowledge  of  mankind  to  preserve 
him  from  the  dangers  of  misplaced  confidence  in  his  agents,  corre- 
spondents, and  connexions.  If  the  science  requisite  to  make  a  good 
farmer  is  more  common  than  that  which  can  make  a  good  merchant, 
it  is  not  surprising,  that  the  labour  of  the  former  is  but  poorly  paid, 
in  comparison  with  that  of  the  latter. 

It  is  not  meant  by  this  to  be  understood,  that  commercial  industry 
in  every  branch,  requires  a  combination  of  rarer  qualifications  th.m 
agricultural.  The  retail  dealers  for  the  most  part  pursue  the  routine 
of  their  business  quite  as  mechanically  as  the  generality  of  farmers, 
and,  in  some  kinds  of  cultivation,  very  uncommon  care  and  sagacity 


332  ON  DISTRIBUTION.  BOOK  II 

are  requisite.  It  is  for  the  reader  to  make  the  application :  the  busi- 
ness of  the  teacher  is,  firmly  to  establish  general  principles ;  whence 
it  will  be  easy  to  draw  a  multitude  of  inferences,  varied  and  modified 
by  circumstances,  which  are  themselves  the  consequences  of  other 
principles  laid  down  in  other  parts  of  the  subject.  Thus,  in  astro- 
nomy, when  we  are  told,  that  all  the  planets  describe  equal  areas  in 
the  same  space  of  time,  there  is  an  implied  reservation  of  such 
derangements,  as  arise  from  the  proximity  of  other  planets,  whose 
attractive  powers  depend  on  another  law  of  natural  philosophy;  and 
this  must  be  attended  to  in  the  examination  of  the  phenomena  of 
each  in  particular.  It  is  for  him,  who  would  apply  general  laws  to 
particular  and  isolated  cases,  to  make  allowance  for  the  influence  of 
each  of  those  laws  or  principles,  whose  existence  is  already  recog- 
nised. 

In  reviewing  presently  the  profit  of  mere  manual  labour,  we 
shall  see  the  peculiar  advantage,  which  his  character  of  master  gives 
to  the  adventurer  over  the  labourer ;  but  it  may  be  useful  to  observe 
by  the  way  the  other  advantages  within  reach  of  an  intelligent  su- 
perior. He  is  the  link  of  communication,  as  well  between  the  va- 
rious classes  of  producers,  one  with  another,  as  between  the  producer 
and  the  consumer.  He  directs  the  business  of  production,  and  is 
the  centre  of  many  bearings  and  relations;  he  profits  by  the  know- 
ledge and  by  the  ignorance  of  other  people,  and  by  every  accidental 
advantage  of  production. 

Thus,  it  is  this  class  of  producers,  which  accumulates  the  largest 
fortunes,  whenever  productive  exertion  is  crowned  by  unusual  suc- 
cess. 


SECTION  IV. 
Of  the  Profits  of  the  Operative  Labourer.* 

Simple,  or  rude  labour  may  be  executed  by  any  man  possessed 
of  life  and  health ;  wherefore,  bare  existence  is  all  that  is  requisite 
to  insure  a  supply  of  this  description  of  industry.  Consequently, 
its  wages  seldom  rise  in  any  country  much  above  what  is  absolutely 
necessary  to  subsistence ;  and  the  quantum  of  supply  always  re- 
mains on  a  level  with  the  demand ;  nay,  often  goes  beyond  it ;  for 
the  difficulty  lies  not  in  acquiring  existence,  but  in  supporting  it. 
Whenever  the  mere  circumstance  of  existence  is  sufficient  for  the 

*  By  the  term  labourer,  I  mean,  the  person  who  works  on  account  of  a  mas- 
ter-agent, or  adventurer,  in  industry ;  for  such  as  are  masters  of  their  own  labour, 
like  the  cobbler  in  his  stall,  or  the  itinerant  knife-grinder,  unite  the  two  charac- 
ters of  adventurer  and  labourer;  their  profits  being  in  part  governed  by  the  cir- 
cumstances detailed  in  the  preceding  section,  and  partly  by  those  developed  in 
this.  It  is  necessary  also  to  premise,  that  the  labour  spoken  of  in  the  present  sec- 
•ion  is  that,  which  requires  little  or  no  study  or  training;  the  acquisition  of  any 
talent  or  personal  skill  entitles  the  possessor  to  a  further  profit,  regulated  upon 
me  orinciples  explained,  supra,  sect.  1.  of  this  chapter. 


CHAP.  VH.  ON  DISTRIBUTION.  333 

execution  of  any  kind  of  work,  and  that  work  affords  the  means  of 
supporting  existence,  the  vacuum  is  speedily  filled  up. 

There  is,  however,  one  thing  to  be  observed.  Man  does  not 
come  into  the  world  with  the  size  and  strength  sufficient  to  perform 
labour  even  of  the  rudest  kind.  He  acquires  this  capability  not  till 
the  age  of  fifteen  or  twenty,  more  or  less,  and  may  be  regarded  as  an 
item  of  capital,  formed  of  the  growing  annual  accumulation  of  the 
sums  spent  in  rearing  him.*  By  whom,  then,  is  this  accumulation 
effected  ?  In  general  by  the  parents  of  the  labourer,  by  persons  of 
his  own  calling,  or  of  one  akin  to  it  In  this  class  of  life,  therefore, 
the  wages  are  somewhat  more  than  is  necessary  for  bare  personal 
existence;  they  must  be  sufficient  to  maintain  the  children  of  the 
labourer  also. 

If  the  wages  of  the  lowest  class  of  labour  were  insufficient  to 
maintain  a  family,  and  bring  up  children,  its  supply  would  never  be 
kept  up  to  the  complement;  the  demand  would  exceed  the  supplv 
in  circulation;  and  its  wages  would  increase,  until  that  class  were 
again  enabled  to  bring  up  children  enough  to  supply  the  deficiency. 

This  would  happen,  if  marriage  were  discouraged  amongst  the 
labouring  class.  A  man  without  wife  or  children  may  afford  his 
labour  at  a  much  cheaper  rate,  than  one  who  is  a  husband  and  a 
lather.  If  celibacy  were  to  gain  ground  amongst  the  labouring 
class,  that  class  would  not  only  contribute  nothing  to  recruit  its  own 
members,  but  would  prevent  others  from  supplying  the  deficiency. 
A  temporary  fall  in  the  price  of  manual  labour,  arising  from  the 
cheaper  rate,  at  which  single  men  can  afford  to  work,  would  soon 
be  followed  by  a  disproportionate  rise;  because  the  number  of 
workmen  would  fall  off.  Thus,  even  were  it  not  more  to  the  inter- 
est of  masters  to  employ  married  men,  on  account  of  their  steadi- 
ness, they  should  do  so,  though  at  a  greater  charge,  to  avoid  the 
higher  price  of  labour,  that  must  eventually  recoil  on  them. 

Every  particular  line  or  profession  does  not,  indeed,  recruij  its 
own  numbers  with  children  nursed  among  its  own  members.  The 
new  generation  is  transferred  from  one  class  of  life  to  another,  and 
particularly  from  rural  occupations  to  occupations  of  a  similar  cast 
in  the  towns;  for  this  reason,  that  children  are  cheaper  trained  in 
the  country :  all  I  mean  to  say  is,  that  the  rudest  and  lowest  class  of 
labour  necessarily  derives  from  its  product  a  portion  sufficient,  not 
merely  for  its  present  maintenance,  but  likewise  for  the  recruiting 
of  its  numerical  strength,  f 

When  a  country  is  on  the  decline,  and  contains  less  of  the  means 

*  A  full-grown  man  is  an  accumulated  capital ;  the  sum  spent  in  rearing  him 
is  indeed  consumed,  but  consumed  in  a  reproductive  way,  calculated  to  yield  the 
product  man. 

f  The  evidence  examined  before  a  committee  of  the  House  of  Commons  of 
England,  in  1815,  leads  to  the  conclusion,  that  the  high  price  of  food,  at  that 
period,  had  the  effect,  of  depressing,  rather  than  elevating  the  scale  of  wages.  I 
have  myself  remarked  the  similar  effect  of  the  scarcities  in  France,  of  the  years 
1811  and  1817.  The  difficulty  of  procuring  subsistence  either  'breed  more 


334  ON  DISTRIBUTION.  BOOK  U 

of  production  and  less  of  knowledge,  activity,  and  capital,  the  de 
mand  for  raw  or  simple  labour  diminishes  by  degrees ;  wages  fai 
gradually  below  the  rate  necessary  for  recruiting^the  labouring  class 
its  numbers  consequently  decrease,  and  the  offspring  of  the  othei 
classes,  whose  employment  diminishes  in  the  same  proportion,  is 
degraded  to  the  step  immediately  below.  On  the  contrary,  when 
prosperity  is  advancing,  the  inferior  classes  not  only  fill  up  their 
own  complement  with  ease,  but  furnish  a  surplus  and  addition  to 
the  classes  immediately  above  them :  and  some,  by  great  good  for- 
tune or  brilliancy  of  talent,  arrive  at  a  still  loftier  eminence,  and 
reach  even  the  highest  stations  in  society. 

The  labour  of  persons  not  entirely  dependent  for  subsistence  on 
the  fruits  of  labour  can  be  afforded  cheaper,  than  that  of  such  as  are 
labourers  by  occupation.  Being  fed  from  other  sources,  their  wages 
are  not  settled  by  the  price  of  subsistence.  The  female  spinners  in 
country  villages  probably  do  not  earn  the  half  of  their  necessary 
expenses,  small  as  they  are :  one  is  perhaps  the  mother,  another  the 
daughter,  sister,  aunt,  or  mother-in-law  of  a  labourer,  who  would 
probably  support  her,  if  she  earned  nothing  for  herself.  Were  she 
dependent  for  subsistence  on  her  own  earnings  only,  she  must  evi- 
dently double  her  prices,  or  die  of  want ;  in  other  words,  her  in- 
dustry must  be  paid  doubly,  or  would  cease  to  exist. 

The  same  may  be  said  of  most  kinds  of  work  performed  by 
females.  They  are  in  general  but  poorly  paid,  because  a  large  pro- 
portion of  them  are  supported  by  other  resources  than  those  of  their 
own  industry,  and  can,  therefore,  supply  the  work  they  are  capable 
of  at  a  cheaper  rate,  than  even  the  bare  satisfaction  of  their  wants. 
The  work  of  the  monastic  order  is  similarly  circumstanced.  It  is 
fortunate  for  the  actual  laboureVs  in  those  countries  where  mona- 
chism  abounds,  that  it  manufactures  little  else  but  trumpery ;  for,  if 
its  industry  were  applied  to  works  of  current  utility,  the  necessi- 
tous labourers  in  the  same  department,  having  families  to  support, 
would  be  unable  to  work  at  so  low  a  rate,  and  must  absolutely 
perish  by  want  and  starvation.  The  wages  of  manufacturing,  are 
often  higher  than  those  of  agricultural  labour ;  but  they  are  liable  to 
the  most  calamitous  oscillation.  War  or  legislative  prohibition 
will  sometimes  suddenly  extinguish  the  demand  for  a  particular 
product,  and  reduce  the  industry  employed  upon  it  to  a  state  of  ut- 
ter destitution.  The  mere  caprice  of  fashion  is  often  fatal  to  whole 
classes.  The  substitution  of  shoe  ribands  for  buckles  was  a  severe 
temporary  blow  to  the  population  of  Sheffield  and  Birmingham.* 

The  smallest  variations  in  the  price  of  rude  or  simple  labour  have 
ever  been  justly  considered  as  serious  calamities.  In  classes  of 
somewhat  superior  wealth  and  talents,  which  are,  in  fact,  a  species 
of  personal  wealth,  a  diminution  in  the  rate  of  profits  entails  only  a 

abourers  into  the  market,  or  exacted  more  exertion  from  those  already  engaged; 
!hus  occasioning  a  temporary  glut  of  labour.     But  the  necessary  sufferings  of 
the  labouring  class  at  the  time  must  inevitably  have  thinned  its  ranks. 
*  Malthus,  Essay  on  Popul.  ed.  5.  b.  iii.  c.  13. 


CHAP.  VII.  ON  DISTRIBUTION.  335 

reduction  of  expense,  or,  at  most,  but  trenches,  in  some  measure, 
upon  the  capital  those  classes  generally  have  at  their  disposal.  But 
to  those,  whose  whole  income  is  a  bare  subsistence,  a  fall  of  wages 
is  an  absolute  death-warrant,  if  not  to  the  labourer  himself,  to  part 
of  his  family  at  least. 

Wherefore,  all  governments,  pretending  to  the  smallest  paternal 
solicitude  for  their  subjects'  welfare,  have  evinced  a  readiness  to  aid 
the  indigent  class,  whenever  any  unexpected  event  has  accidentally 
reduced  the  wages  of  common  labour  below  the  level  of  the  labour- 
er's subsistence.  Yet  the  benevolent  intentions  of  the  government 
have  too  often  failed  in  their  efficacy,  for  want  of  judgment  in  the 
choice  of  a  remedy.  To  render  it  effective,  it  is  necessary  first  to 
explore  the  cause  of  depression  in  the  price  of  labour.  If  that  de- 
pression be  of  a  permanent  nature,  pecuniary  and  temporary  aid  is 
of  no  possible  avail,  and  merely  defers  the  pressure  of  the  mischief. 
Of  this  nature  are  the  discovery  of  new  processes,  the  introduction 
of  new  articles  of  import,  or  the  emigration  of  a  considerable  num- 
ber of  consumers,  (a)  In  such  emergencies,  a  remedy  must  be 
sought  in  the  discovery  of  some  new  arid  permanent  occupation  for 
the  hands  thrown  out  of  employ,  in  the  encouragement  of  new 
channels  of  industry,  in  the  setting  on  foot  of  distant  enterprises, 
the  planting  of  colonies,  &c. 

If  the  depression  be  not  of  a  permanent  nature,  if  it  be  the  mere 
result  of  good  or  bad  crops,  the  temporary  assistance  should  be 
limited  to  the  unfortunate  sufferers  by  the  oscillation. 

Governments  or  individuals,  who  attempt  indiscriminate  benefi 
cence,  will  have  the  frequent  mortification  of  finding  their  bounty 
unavailing.     This  may  be  more  convincingly  demonstrated  by  ex- 
ample than  by  argument. 

Suppose  in  a  vine  district  the  quantity  of  casks  to  be  so  abundant, 
as  to  make  it  impossible  to  use  them  all.  A  war,  or  a  statute  le- 
velled against  the  production  of  wine,  may,  perhaps,  have  caused 
many  proprietors  of  vineyards  to  adopt  a  different  cultivation  of 
their  lands;  this  is  a  permanent  cause  of  surplus  cooperage  in  the 
market.  In  ignorance  of  this  cause,  a  general  effort  is  made  to  as 
sist  the  labouring  coopers,  either  by  purchasing  their  casks  withou 
wanting  them,  or  by  making  up,  in  the  shape  of  alms,  the  loss  they 
have  sustained  in  the  diminution  of  their  profits.  Useless  pur- 

(«)  The  second  and  last  of  these  circumstances  are  neither  of  them  necessa- 
rily, universally,  or  permanently,  followed  by  the  depression  of  the  rate  of  wages. 
When  a  new  object  of  import  does  not  supersede  one  of  either  home  or  foreign 
production,  it  must  tend  to  raise  the  rate  of  wages,  as  it  can  only  be  procured  by. 
enlarged  home  production.  The  emigration  of  consumers,  continuing  to  draw 
subsistence  from  the  country  they  desert,  leaves  in  activity  an  equal  mass  of 
human  labour,  though  possibly  with  some  variation  of  employment.  Besides 
it  may  be  temporary  only,  as  that  of  the  English  to  the  continent,  and  of  the 
Irish  both  to  England  and  to  the  continent;  who  possibly  might  be  brought 
back  by  an  improvement  of  domestic  finances  or  of  domestic  security  and  com- 
fort. T. 


336  ON  DISTRIBUTION.  BOOK  II. 

chases,  or  eleemosynary  aid,  however,  can  not  last  forever;  and, 
the  moment  they  cease,  the  poor  coopers  will  find  themselves  pre- 
cisely in  the  same  distressful  situation,  from  which  it  was  attempted 
to  extricate  them.  All  the  sacrifices  and  expense  will  have  been 
incurred  with  no  advantage,  other  than  that  of  a  little  delay  in  the 
date  of  their  hopeless  sufferings  and  privations. 

Suppose  on  the  contrary,  the  cause  of  the  superabundance  of  casks 
to  be  but  temporary;  to  be  nothing  more  than  the  failure  of  the  an- 
nual crop.  If,  instead  of  affording  temporary  relief  to  the  working 
coopers,  they  be  encouraged  to  remove  to  other  districts,  or  to  enter 
upon  some  other  branch  of  industry,  it  will  follow,  that  the  next 
vear,  when  wine  may  be  abundant,  there  will  be  a  scarcity  of  casks 
to  receive  it ;  the  price  will  become  exorbitant,  and  be  settled  at  the 
suggestion  of  avarice  and  speculation;  which  being  unable  them- 
selves to  manufacture  casks,  after  the  means  of  producing  them  have 
been  thus  destroyed,  part  of  the  wine  will  probably  be  spoiled  for 
want  of  casks  to  hold  it.  It  will  require  a  second  shock  and  derange- 
ment of  the  rate  of  wages,  before  the  manufacture  of  the  article  can 
be  brought  again  to  a  level  with  the  demand. 

Whence  it  is  evident,  that  the  remedy  must  be  adapted  to  the  par- 
ticular cause  of  the  mischief;  consequently,  the  cause  must  be  ascer- 
tained, before  the  remedy  is  devised. 

Necessary  subsistence,  then,  may  be  taken  to  be  the  standard  of 
the  wages  of  common  raw  labour ;  but  this  standard  is  itself  extreme- 
ly fluctuating ;  for  habit  has  great  influence  upon  the  extent  of  human 
wants.  It  is  by  no  means  certain,  that  the  labourers  of  some  can- 
tons of  France  could  exist  under  a  total  privation  of  wine.  In  Lon 
don,  beer  is  considered  indispensable ;  that  beverage  is  there  so  much 
an  article  of  necessity,  that  beggars  ask  for  money  to  buy  a  pot  of 
beer,  as  commonly  as  in  France  for  the  purchase  of  a  morsel  of 
bread ;  and  this  latter  object  of  solicitation,  which  appears  to  us  so 
very  natural,  may  seem  impertinent  to  foreigners  just  arrived  from  a 
country,  where  the  poor  subsist  on  potatoes,  manioc,  or  other  still 
coarser  diet. 

What  is  necessary  subsistence,  depends,  therefore,  partly  on  the 
habits  of  the  nation,  to  which  the  labourer  may  happen  to  belong. 
In  proportion  as  the  value  he  consumes  is  small,  his  ordinary  wages 
may  be  low,  and  the  product  of  his  labour  cheap.  If  his  condition 
be  improved,  and  his  wages  raised,  either  his  product  becomes 
dearer  to  the  consumer,  or  the  share  of  his  fellow  producers  is 
diminished. 

The  disadvantages  of  their  position  are  an  effectual  barrier  against 
any  great  extension  of  the  consumption  of  the  labouring  classes. 
Humanity,  indeed,  would  rejoice  to  see  them  and  their  families 
dressed  in  clothing  suitable  to  the  climate  and  season ;  houses  in 
roomy,  warm,  airy,  and  healthy  habitations,  and  fed  with  wholesome 
and  plentiful  diet,  with  perhaps  occasional  delicacy  and  variety ;  but 
there  are  very  few  countries,  where  wants,  apparently  so  moderate, 
arv  not  considered  far  beyond  the  limits  of  strict  necessity,  and 


CHAP.  VII.  ON  DISTRIBUTION.  337 

therefore  not  to  be  gratified  by  the  customary  wages  of  the  mere 
labouring  class. 

The  limit  of  strict  necessity  varies,  not  only  according  to  the  more 
or  less  comfortable  condition  of  the  labourer,  and  his  family,  but 
likewise  according  to  the  several  items  of  expense  reputed  unavoid- 
able in  the  country  he  inhabits.  Among  these  is  the  one  we  have 
just  adverted  to ;  namely,  the  rearing  of  children ;  there  are  others 
less  urgent  and  imperative  in  their  nature,  though  equally  enforced 
by  feeling  and  natural  sentiments ;  such  as  the  care  of  the  aged,  to 
which  unhappily  the  labouring  class  are  far  too  inattentive.  Nature 
could  entrust  the  perpetuation  of  the  human  species  to  no  impulse 
less  strong,  than  the  vehemence  of  appetite  and  desire,  and  the  anxiety 
of  paternal  love;  but  has  abandoned  the  aged,  whom  she  no  longer 
wants,  to  the  slow  workings  of  filial  gratitude,  or,  what  is  even  less 
to  be  depended  upon,  to  the  providence  of  their  younger  years.  Did 
the  habitual  practice  of  society  imperatively  subject  every  family  to 
the  obligation  of  laying  by  some  provision  for  age,  as  it  commonly 
does  for  infancy,  our  ideas  of  necessity  would  be  somewhat  enlarged, 
and  the  minimum  of  wages  somewhat  raised. 

It  must  appear  shocking  to  the  eye  of  philanthropy,  that  such  is 
not  always  the  case.  It  is  lamentable  to  think  of  the  little  provi- 
dence of  the  labouring  classes  against  the  season  of  casual  misfortune, 
infirmity,  and  sickness,  as  well  as  against  the  certain  helplessness  of 
old  age.  Such  considerations  afford  most  powerful  reasons  for  for- 
warding and  encouraging  provident  associations  of  the  labouring 
class,  for  the  daily  deposit  of  a  trifling  saving,  as  a  fund  in  reserve 
for  that  period,  when  age,  or  unexpected  calamity,  shall  cut  off  the 
resource  of  their  industry.*  But  such  institutions  can  not  be  ex- 

*  Saving-banks  have  succeeded  in  several  districts  of  England,  Holland,  and 
Germany ;  particularly  where  the  government  has  been  wise  enough  to  withhold 
its  interference.  The  Insurance  Company  of  Paris  has  set  one  on  foot,  upon  the 
most  liberal  principles  and  with  the  most  substantial  guarantee.  It  is  to  be  hoped, 
that  the  labouring  classes  in  general  will  see  the  wisdom  of  placing  their  little 
savings  in  such  an  establishment,  in  preference  to  the  hazardous  investments 
they  have  often  been  decoyed  into.  There  is  besides  a  further  national  advan- 
tage in  such  a  practice,  namely,  that  of  augmenting  the  general  mass  of  pro- 
ductive capital,  and  consequently  extending  the  demand  for  human  agency.  (1) 

(1)  [In  the  principal  cities  of  the  United  States,  Saving-banks  have  also  oeen 
established,  and  have  been  attended  with  so  much  benefit,  that  they  are  now 
spreading  through  every  part  of  the  Union.  To  the  Friendly  or  Beneficial 
Societies  there  are  strong  objections,  to  which  the  Saving-banks  are  not  liable. 
The  Friendly  Societies  have,  undoubtedly,  done  some  good ;  but  attended  with  a 
certain  portion  of  evil.  The  following  extract  from  a  report  of  the  Committee 
of  the  Highland  Society,  places  these  latter  societies  in  a  very  proper  light. 

"  During  tlie  last  century,  a  number  of  Friendly  Societies  have  been  estab- 
lished by  the  labourers  in  different  parts  of  Great  Britain,  to  enable  them  to 
«nake  provision  against  want.  The  principle  of  these  societies  usually  is,  thai 
Uie  members  pay  a  certain  stated  sum  periodically,  from  which  an  allowance  is 
Tiade  to  them  upon  sickness  or  old  age,  and  to  their  families  upon  their  death. 
These  societies  have  done  much  good ;  but  they  are  attended  with  some  disad 
vantages.  In  particular,  the  frequent  meetings  of  the  members  occasion  the  !os« 
M  2  S 


336  ON  DISTRIBUTION.  BOOK  D. 

pected  to  succeed,  unless  the  labourer  be  taught  to  consider  these 
means  of  precaution  as  a  matter  of  duty  and  necessity,  and  hold  to 
the  obligation  to  carry  his  savings  to  such  places  of  deposit,  as  equally 
indispensable  with  the  payment  of  his  rent  or  taxes :  this  new  duty 
would  doubtless  tend  in  a  slight  degree  to  raise  the  scale  of  wages, 
so  as  to  allow  of  such  frugality,  but  for  that  very  reason  it  is  desirable. 
How  can  such  establishments  thrive  in  countries  where  habit  and 
the  interested  views  of  the  government  conspire  to  make  the  labourer 
spend  in  the  public-house  not  only  what  he  might  lay  by,  but  frequently 
the  very  subsistence  of  his  family,  in  which  all  his  comforts  and  plea- 
sures should  be  centred.  The  vain  and  costly  amusements  of  the 
rich  are  not  always  justifiable  in  the  eye  of  reason;  but  how  much 
more  disastrous  is  the  senseless  dissipation  of  the  poor !  The  mirth 
of  the  indigent  is  invariably  seasoned  with  tears ;  and  the  orgies  of 
the  populace  are  days  of  mourning  to  the  philosopher. 

Besides  the  reasons  advanced  in  this  and  the  preceding  sections, 
to  explain  why  the  wages  of  the  adventurer,  even  if  he  derive  no 
profit  as  a  capitalist,  are  generally  higher  than  those  of  the  mere 
labourer,  there  are  others,  not  so  solid  or  well  founded  indeed,  but 
such  as  nevertheless  must  not  be  overlooked. 

The  wages  of  the  labourer  are  a  matter  of  adjustment  and  compact 
between  the  conflicting  interests  of  master  and  workman ;  the  layer 
endeavouring  to  get  as  much,  the  former  to  give  as  little,  as  he  pos- 
sibly can ;  but  in  a  contest  of  this  kind,  there  is  on  the  side  of  the 
master  an  advantage,  over  and  above  what  is  given  him  by  the  nature 
of  his  occupation.  The  master  and  the  workman  are  no  doubt 
equally  necessary  to  each  other;  for  one  gains  nothing  but  with  the 
other's  assistance ;  the  wants  of  the  master  are,  however,  of  the  two, 
less  urgent  and  less  immediate.  There  are  few  masters  but  what 
could  exist  several  months  or  even  years,  without  employing  a  single 
labourer;  and  few  labourers  that  can  remain  out  of  work  for  many 
weeks,  without  being  reduced  to  the  extremity  of  distress.  And  this 
circumstance  must  have  its  weight  in  striking  the  bargain  for  wages 
between  them. 

Sismondi,  in  a  late  work*  published  since  the  appearance  of  my 

of  much  time,  and  frequently  of  a  good  deal  of  money  spent  in  entertainments. 
The  stated  payments  must  be  regularly  made ;  otherwise,  after  a  certain  time, 
the  member  (necessarily  from  its  being  in  fact  an  insurance)  loses  the  benefit 
of  all  that  he  has  formerly  paid.  Nothing  more  than  the  stated  payments  car 
be  made,  however  easily  the  member  might  be  able  at  the  moment  to  add  a  little 
to  his  store.  Frequently  the  value  of  the  chances  on  which  the  societies  are 
formed,  is  ill  calculated ;  in  which  case  either  the  contributors  do  not  receive  an 
equivalent  for  their  payments;  or  too  large  an  allowance  is  given  at  first,  which 
brings  on  the  bankruptcy  of  the  institution.  Frequently  the  sums  are  embezzled 
by  artful  men,  who,  by  imposing  on  the  inexperience  of  the  members,  get  them- 
selves elected  into  offices  of  trust.  The  benefit  is  distant  and  contingent ;  each 
member  not  having  benefit  from  his  contributions  in  every  case,  but  only  in  the 
case  of  his  falling  into  the  situations  of  distress  provided  for  by  the  society. 
And  the  whole  concern  is  so  complicated,  that  many  have  hesitation  in  embark 
»ng  in  it  their  hard-earned  savings."]  AMERICAN  EDITOR. 

*  Nouvtaux  Prin.  cTEcon.  Pol.  liv.  vii.  c.  9. 


CHAP.  VII.  ON  DISTRIBUTION.  339 

third  edition,  has  suggested  some  legislative  provisions,  for  the 
avowed  purpose  of  bettering  the  condition  of  the  labouring  classes. 
He  sets  out  with  the  position,  that  the  low  rate  of  their  wages  ac- 
crues to  the  benefit  of  the  adventurers  and  masters  who  employ 
them ;  and  thence  infers,  that  in  the  moment  of  calamity,  their  claim 
for  relief  is  upon  the  masters,  and  not  upon  society  at  large.  Where- 
fore, he  proposes  to  make  it  obligatory  upon  the  proprietors  and 
farmers  of  land  at  all  times  to  feed  the  agricultural,  and  upon  the 
manufacturers  to  provide  subsistence  for  the  manufacturing  labourer. 
On  the  other  hand,  to  prevent  the  probable  excess  of  population, 
consequent  upon  the  certain  prospect  of  subsistence  to  themselves 
and  their  families,  he  would  give  to  their  respective  masters  the 
right  of  preventing  or  permitting  marriage  amongst  their  people. 

This  scheme,  however  entitled  to  favourable  consideration  by  the 
motive  of  humanity  in  which  it  originated,  seems  to  me  altogether 
impracticable.  It  would  be  a  gross  violation  of  the  right  of  property, 
to  saddle  one  class  of  society  with  the  compulsory  maintenance  of 
another;  and  it  would  be  a  violation  still  more  gross,  to  give  one 
set  of  men  a  personal  control  over  another ;  for  the  freedom  of  per- 
sonal action  is  the  most  sacred  of  all  the  objects  of  property.  The 
arbitrary  prohibition  of  marriage  to  one  class  is  a  premium  to  the 
procreation  of  all  the  rest.  Besides,  there  is  no  truth  in  the  posi- 
tion, that  the  low  rate  of  wages  redounds  exclusively  to  the  profit 
of  the  master.  Their  reduction,  followed  up  by  the  constant  action 
of  competition,  is  sure  to  bring  about  a  fall  of  the  price  of  products; 
so  that  it  is  the  class  of  consumers,  in  other  words,  the  whole  com- 
munity, that  derives  the  profit.  m  And  if  it  be  so  great  as  to  throw 
the  subsistence  of  the  labourers  upon  the  public  at  large,  the  public 
is  in  a  great  measure  indemnified  by  the  reduced  prices  of  the  objects 
of  its  consumption. 

There  are  some  evils  incident  to  the  imperfection-  of  the  human 
species,  and  to  the  constitution  of  nature ;  and  of  this  description  is 
the  excess  of  population  above  the  means  of  subsistence.  On  the 
whole,  this  evil  is  quite  as  severely  felt  in  a  horde  of  savages,  as  in 
a  civilized  community.  It  would  be  unjust  to  suppose  it  a  creature 
of  social  institutions,  and  a  mere  fallacy  to  hold  out  the  prospect  of 
a  complete  remedy;  and,  however  it  may  merit  the  thanks  of  man- 
kind to  study  the  means  of  palliation,  we  must  be  cautious  not  to 
give  a  ready  ear  to  expedients  that  can  have  no  good  effect,  and 
must  prove  worse  than  the  disease  itself.  A  government  ought 
doubtless  to  protect  the  interests  of  the  labouring  classes,  as  far  as  it 
can  do  so  without  deranging  the  course  of  human  affairs,  or  cramp- 
ing the  freedom  of  individual  dealings;  for  those  classes  are  less 
advantageously  placed  than  the  masters,  in  the  common  course  of 
things;  but  a" wise  ruler  will  studiously  avoid  all  interference 
between  individuals,  lest  it  superadd  the  evils  of  administration  to 
those  of  natural  position.  Thus,  he  will  equally  protect  the  master 
and  the  labourer  from  the  effects  of  combination.  The  masters  have 
he  advantage  of  smaller  numbers  and  easier  communication;  where- 


340  ON  DISTRIBUTION.  BOOK  II 

as,  the  labourers  can  scarcely  combine,  without  assuming  the  air  of 
revolt  and  disaffection,  which  the  police  is  ever  on  the  watch  to 
repress. '  Nay,  the  partisans  of  the  exporting  system  have  gone  so 
far  as  to  consider  the  combinations  of  the  journeymen  as  injurious  to 
national  prosperity,  because  they  tend  to  raise  the  price  of  the  com- 
modities destined  for  export,  and  thereby  to  injure  their  preference 
in  the  foreign  market,  which  they  look  upon  as  so  desirable.  But 
what  must  be  the  character  of  that  policy,  which  aims  at  national 
prosperity  through  the  impoverishment  of  a  large  proportion  of  the 
home  producers,  with  a  view  to  supply  foreigners  at  a  cheaper  rate, 
and  give  them  all  the  benefit  of  the  national  privation  and  self- 
denial  ? 

One  sometimes  meets  with  masters,  who,  in  their  anxiety  to 
justify  their  avaricious  practices  by  argument,  assert  roundly,  that 
"he  labourer  would  perform  less  work,  if  better  paid,  and  that  he 
must  be  stimulated  by  the  impulse  of  want.  Smith,  a  writer  of  no 
small  experience  and  singular  penetration,  is  of  a  very  different 
opinion.  Let  us  take  his  own  words.  "  The  liberal  reward  of 
labour,  as  it  encourages  the  propagation,  so  it  increases  the  industry 
of  the  common  people.  The  wages  of  labour  are  the  encouragement 
of  industry,  which,  like  every  other  human  quality,  improves  in 
proportion  to  the  encouragement  it  receives.  A  plentiful  subsist- 
ence increases  the  bodily  strength  of  the  labourer,  and  the  comfort- 
able hope  of  bettering  his  condition,  and  of  ending  his  days  perhaps 
in  ease  and  plenty,  animates  him  to  exert  that  strength  to  the  utmost. 
Where  wages  are  high,  accordingly,  we  shall  always  find  the  work- 
men more  active,  diligent,  and  expeditious,  than  where  they  are 
low ;  in  England,  for  example,  than  Scotland ;  in  the  neighbourhood 
of  great  towns,  than  in  remote  country  places.  Some  workmen, 
indeed,  when  they  can  earn  in  four  days  what  will  maintain  them 
through  the  week,  will  be  idle  the  other  three.  This,  however,  is 
by  no  means  the  case  with  the  greater  part.  Workmen,  on  the  con- 
trary, when  they  are  liberally  paid  by  the  piece,  are  very  apt  to 
overwork  themselves,  and  to  ruin  their  health  and  constitution  in  a 
few  years."* 


SECTION  V. 

Of  the  Independence  accruing  to  the  Moderns  from  the  Advancement 
of  Industry. 

The  maxims  of  political  economy  are  immutable;  ere  yet  observed 
or  discovered,  they  were  operating  in  the  way  above  described  ;  the 
same  cause  regularly  producing  the  same  effect;  the  wealth  of  Tyre 
and  of  Amsterdam  originated  in  a  common  source.  It  is  society 
that  has  been  subject  to  change,  in  the  progressive  advancement  of 
industry. 

*  Wealth  of  Nations,  book  i.  c.  8. 


CHAP.  VIL  ON  DISTRIBUTION.  3U 

The  ancients  were  not  nearly  so  far  behind  the  moderns  in  agri- 
culture, as  in  the  mechanical  arts.  Wherefore,  since  agricuitura 
products  are  alone  (1)  essential  to  the  multiplication  of  mankind,  the 
unoccupied  surplus  of  human  labour  was  larger  than  in  modern 
days.  Those,  who  happened  to  have  little  or  no  land,  unable  to 
subsist  upon  the  product  of  their  own  industry,  unprovided  with 
capital,  and  too  proud  to  engage  in  those  subordinate  employments, 
which  were  commonly  filled  by  slaves,  had  no  resource  but  to  bor- 
row, without  a  prospect  of  the  ability  to  repay,  and  were  continually 
demanding  that  equal  division  of  property,  which  was  utterly  im- 
practicable. With  a  view  to  stifle  their  discontents,  the  leading  men 
of  the  state  were  obliged  to  engage  them  in  warlike  enterprises, 
and,  in  the  intervals  of  peace,  to  subsist  them  on  the  spoils  of  the 
enemy,  or  on  their  own  private  means.  This  was  the  grand  source 
of  the  civil  disorder  and  discord,  which  continually  distracted  the 
states  of  antiquity ;  of  the  frequency  of  their  wars,  of  the  corruption 
of  their  suffrages,  and  of  the  connexion  of  patron  and  client,  which 
backed  the  ambition  of  a  Marius  and  a  Sylla,  a  Pompey  and  a 
Caesar,  an  Antony  and  an  Octavius,  and  which  finally  reduced  the 
whole  Roman  people  to  the  condition  of  servile  attendants  upon  the 
court  of  a  Caligula,  a  Heliogabalus,  or  some  monster  of  equal  enor- 
mity, whose  grand  condition  of  empire  was  the  subsistence  of  the 
objects  of  his  atrocious  tyranny. 

The  industrious  cities  of  Tyre,  Corinth,  and  Carthage,  were  some- 
what differently  circumstanced;  but  they  could  not  permanently 
resist  the  hostility  of  poorer  and  more  warlike  nations,  impelled  by 
the  prospect  of  plunder.  Industry  and  civilization  were  the  continual 
prey  of  barbarism  -and  penury ;  and  Rome  herself  at  length  yielded 
to  the  attack  of  Gothic  and  Vandalic  conquerors. 

Thus  re-plunged  into  a  state  of  barbarism,  the  condition  of  Europe, 
during  the  middle  ages,  was  but  a  revival  of  the  earliest  scenes  of 
Grecian  and  Italian  history,  in  an  aggravated  form.  Each  baron  or 
great  landholder,  was  surrounded  by  a  circle  of  vassals  or^clients  on 
his  domain,  ready  to  follow  him  in  civil  broils  or  foreign  warfare. 

(1)  The  "  multiplication  of  mankind"  is  not,  as  is  here  asserted  by  our  author, 
alone  dependent  upon  "agricultural  products;"  but,  likewise,  upon  every  other 
description  of  commodities  essential  to  human  maintenance  and  support;  Food, 
or  subsistence,  is  unquestionably  indispensable  to  the  existence  of  man ;  but  not 
more  necessary  to  his  prolonged  being  and  health,  than  raiment,  shelter,  and 
fire.  The  position  of  Mr.  Malthus,  which  limits  population  to  subsistence  only, 
and  which  is  here  taken  for  granted  and  adopted  by  our  author,  is  not  accurate 
or  just;  and  by  the  more  recent  political  economical  inquirers  has,  therefore, 
either  been  modified  or  abandoned.  Professor  Senior,  in  his  "  Two  Lectures 
on  Population,  delivered  before  the  University  of  Oxford  in  Easter  Term,  1828," 
in  considering  the  general  principles,  adopts  the  following  proposition,  as  wha. 
appears  to  him  an  outline  of  the  laws  of  population :  "  That  the  population  of  » 
given  district  is  limited  only  by  moral  or  physical  evil,  or  by  the  apprehension 
of  a  deficiency  in  the  means  of  obtaining  those  articles  of  wealth ;  or,  in  other 
words,  those  necessaries,  decencies  and  luxuries,  which  the  habits  of  the  mdi« 
riduals  of  each  class  of  the  inhabitants  of  that  district  lead  them  to  require  " 
29  *  AMERICAN  EDITOH. 


342  ON  DISTRIBUTION.  BOOK  II. 

I  should  trench  upon  the  province  of  the  historian,  were  I  to 
attempt  the  delineation  of  the  various  causes  that  have  aided  the 
progress  of  industry  since  that  period ;  but  I  may  be  allowed  merely 
to  note,  by  the  way,  the  great  change  that  has  been  effected,  and  the 
consequence  of  that  change.  Industry  has  become  a  means  of  sub- 
sistence to  the  bulk  of  the  population,  independent  of  the  caprice  of 
the  large  proprietors,  and  without  being  to  them  a  constant  source  of 
alarm :  it  is  nursed  and  supported  by  the  capital  accumulated  by  its 
own  exertions.  The  relation  of  client  and  vassal  has  ceased  to 
exist;  and  the  poorest  individual  is  his  own  master,  and  dependent 
upon  his  personal  faculties  alone.  Nations  can  support  themselves 
upon  their  internal  resources ;  and  governments  derive  from  their 
subjects  those  supplies,  which  they  were  wont  to  dispense  as  a  mat- 
ter of  favour. 

The  increasing  prosperity  of  manufacture  and  commerce  has 
raised  them  in  the  scale  of  estimation.  The  object  of  war  is  changed, 
from  the  spoliation  and  destruction  of  the  sources  of  wealth,  to  their 
quiet  and  exclusive  possession.  For  the  last  two  centuries,  where 
war  has  not  been  made  to  gratify  the  childish  vanity  of  a  nation  or 
a  monarch,  the  bone  of  contention  has  always  been,  either  colonial 
sovereignty,  or  commercial  monopoly.  Instead  of  a  contest  of 
hungry  barbarians  against  their  wealthy  and  industrious  neighbours, 
it  has  been  one  between  civilized  nations  on  either  side;  wherein  the 
victor  has  shown  the  greatest  anxiety  to  preserve  the  resources  of 
the  conquered  territory.  The  invasion  of  Greece  by  the  Turks,  in 
the  fifteenth  century,  appears  to  have  been  the  final  effort  of  pure 
barbarism  arrayed  against  civilization.  The  present  preponderance 
of  industry  and  civilized  habits  amongst  the  general  mass  of  man- 
kind seems  to  exclude  all  probability  of  a  recurrence  of  such  calami- 
tous events.  Indeed,  the  improvement  of  military  science  takes 
away  all  fear  of  the  result  of  such  a  conflict. 

There  is  yet  one  step  more  to  be  made ;  and  that  can  only  be 
rendered  practicable  by  the  wider  diffusion  of  the  principles  of  poli- 
tical economy.  They  will  some  day  have  taught  mankind  that  the 
sacrifice  of  their  lives,  in  a  contest  for  the  acquisition  or  retention  of 
colonial  dominion  or  commercial  monopoly,  is  a  vain  pursuit  of  a 
costly  and  delusive  good;  that  external  products,  even  those  of  the 
colonial  dependencies  of  a  nation,  are  only  procurable  with  the  pro- 
ducts of  domestic  growth :  that  internal  production  is,  therefore,  the 
proper  object  of  solicitude,  and  is  best  to  be  promoted  by  political 
tranquillity,  moderate  and  equal  laws,  and  facility  of  intercourse. 
The  fate  of  nations  will  thenceforth  hang  no  longer  upon  the  preca- 
rious tenure  of  political  pre-eminence,  but  upon  the  relative  degree 
of  information  and  intelligence.  Public  functionaries  will  grow 
more  and  more  dependent  upon  the  productive  classes,  to  whom 
they  must  look  for  supplies;  the  people,  retaining  the  right  of  taxa- 
tion in  their  own  hands,  will  always  be  well  governed  ;  and  the 
struggles  of  power  against  the  current  of  improvement  will  end  in 
its  own  subversion;  for  it  will  vainly  strive  against  the  dispensations 
:>f  nature. 


CHAP.  VIIL  ON  DISTRIBUTION.  343 

CHAPTER  VIIL 

OP  THE  REVENUE  OF  CAPITAL. 

THE  service,  rendered  by  capita],  in  productive  operations,  estab- 
lishes a  demand  for  capital  to  be  so  employed,  and  enables  the  pro- 
prietors of  it  to  charge  more  or  less  for  that  service. 

Whether  the  capitalist  thus  employ  his  capital  himself,  or  lend  it 
to  another  for  that  purpose,  it  yields  a  profit,  that  is  called  the  profit 
of  capital,  distinct  from  that  of  the  industry  employing  it  In  the 
former  case,  the  profit  obtained  constitutes  the  revenue  of  his  capi- 
tal, which  is  added  to  that  of  his  personal  talent  and  industry,  and 
often  confounded  with  it. — In  the  latter,  the  revenue  of  capital  is 
precisely  the  interest  paid  for  its  use,  the  proprietor  abandoning  to 
the  borrower  the  profit  derivable  from  his  personal  employment  of 
the  capital  lent. 

As  the  investigation  of  the  interest  of  capital  lent  will  help  to 
throw  light  on  the  subject  of  the  profit  derivable  from  its  personal 
employment,  it  may  be  as  well,  in  the  first  instance,  to  acquire  a 
just  idea  of  the  nature  and  variation  of  interest. 

SECTION  I. 
Of  Loans  at  Interest. 

The  interest  of'  capital  lent,  improperly  called  the  interest  of 
money,  was  formerly  denominated  usury,  that  is  to  say,  rent  for  its 
use  and  enjoyment;  which,  indeed,  was  the  correct  term;  for  inter- 
est is  nothing  more  than  the  price,  or  rent,  paid  for  the  enjoyment 
of  an  object  of  value.  But  the  word  has  acquired  an  odious  mean- 
ing, and  now  presents  to  the  mind  the  idea  of  illegal,  exorbitant  in- 
terest only,  a  milder  but  less  expressive  term  having  been  substituted 
by  common  usage. 

Before  the  functions  and  utility  of  capital  were  known,  it  is  pro- 
bable, that  the  demand  of  rent  for  it  by  lenders  was  considered  an 
abuse  and  oppression, — an  expedient  to  favour  the  rich  and  prejudice 
the  poor ;  nay,  further,  that  frugality,  the  sole  means  of  amassing 
capital,  was  regarded  as  parsimony,  and  deemed  a  public  mischief 
by  the  populace,  in  whose  eyes,  the  sums  not  spent  by  great  pro- 
prietors were  looked  upon  as  lost  to  themselves.  They  could  not 
comprehend,  that  money,  laid  by  to  be  turned  to  account  in  some 
beneficial  employment,  must  be  equally  spent;  for,  if  it  were  buried, 
it  could  never  be  turned  to,  account  at  all ;  that  it  is,  in  fact,  spent  in 
a  manner  a  thousand  times  more  profitable  to  the  poor  ;*  and  that  a 

*  Vide  infra,  BookllL  on  the  subject  of  re-productive  consumption. 


ON  DISTRIBUTION.  BOOK  II. 

labouring  man  is  never  sure  of  earning  a  subsistence,  except  where 
there  is  a  capital  in  reserve  for  him  to  work  upon.  This  prejudice 
against  rich  individuals,  who  do  not  spend  their  whole  income,  still 
exists  pretty  generally ;  formerly  it  was  universal ;  lenders  them- 
selves were  not  altogether  free  from  it,  but  were  so  much  ashamed 
of  the  part  they  were  acting,  as  to  employ  the  most  disreputable 
agents  in  the  collection  of  profits  perfectly  just,  and  highly  advan- 
tageous to  society. 

It  is,  therefore,  not  surprising  that  the  ecclesiastical,  and  at  several 
periods,  the  civil  codes,  likewise,  should  have  interdicted  loans  at 
interest;  and  that,  during  the  whole  of  the  middle  ages,  throughout 
the  larger  states  of  Europe,  this  traffic  should  have  been  reputed 
infamous,  and  abandoned  to  the  Jews. — The  little  manufacturing  or 
commercial  industry  of  those  days  was  kept  alive  by  the  scanty 
capital  of  the  dealers  and  mechanics  themselves:  and  agricultural 
industry,  which  was  pursued  with  somewhat  better  success,  was 
supported  by  the  advances  of  the  lords  and  great  proprietors,  who 
employed  their  serfs  or  retainers  on  their  own  account.  Loans 
were  contracted  for,  not  with  a  view  of  profitably  employing  the 
money,  but  merely  to  satisfy  some  urgent  want,  so  that  the  exactor 
of  interest  was  profiting  by  a  neighbour's  distress  ;  and  it  may  easily 
be  conceived,  that  a  religion,  founded  on.  the  principle  of  fraternal 
love,  as  the  Christian  religion  is,  must  disapprove  a  calculating 
spirit,  that  even  now  is  a  stranger  to  generous  bosoms,  and  repug- 
nant to  the  common  maxims  of  morality. — Montesquieu*  attributes 
the  decline  of  commerce  to  this  proscription  of  loans  at  interest ; 
which  was  undoubtedly  one  cause,  although,  indeed,  it  was  one 
amongst  many. 

The  progressive  advance  of  industry  has  taught  us  to  view  the 
loan  of  capital  in  a  different  light.  In  ordinary  cases,  it  is  no  longer 
a  resource  in  the  hour  of  emergency,  but  an  agent,  an  instrument, 
which  may  be  turned  to  the  great  benefit,  as  well  of  society,  as  of 
the  individual.  Henceforward,  it  will  be  reckoned  no  more  ava- 
ricious or  immoral  to  take  interest,  than  to  receive  rent  for  land,  or 
wages  for  labour;  it  is  an  equitable  compensation  adjusted  by  mutual 
convenience ;  and  the  contract,  fixing  the  terms  between  borrower 
and  lender,  is  of  precisely  the  same  nature,  as  any  other  contract 
whatsoever. 

In  ordinary  cases  of  exchange,  however,  the  transaction  is  ended 
as  soon  as  the  exchange  is  completed  ;  whereas,  in  the  case  of  a  loan, 
there  remains  to  be  calculated  the  risk  the  lender  incurs  of  never 
recovering  the  whole,  or  at  least  a  part,  of  his  capital.  The  risk  is 
practically  estimated,  and  indemnified  by  some  addition  of  interest, 
in  the  natuie  of  a  premium  of  insurance.  Whenever  there  happens 
to  be  a  question  about  the  interest  of  advances,  a  careful  distinction 
snouid  be  made  between  these,  its  two  component  parts ;  otherwise, 
is  always  danger  of  error ;  and  individuals,  or  even  the  agents 

*  Esprit  des  Lois,  liv.  xxi.  c.  20. 


CHAP.  VIII.  ON  DISTRIBUTION.  345 

of  public  authority,  will  be  apt  to  involve  themselves  in  useless  and 
disastrous  operations. 

Thus,  the  practice  of  usury  has  been  uniformly  revived,  whenever 
it  has  been  attempted  to  limit  the  rate  of  interest,  or  abolish  it  alto- 
gether. The  severer  the  penalties,  and  the  more  rigid  their  exaction, 
the  higher  the  interest  of  money  was  sure  to  rise ;  and  this  is  what 
might  naturally  have  been  expected ;  for  the  greater  the  risk,  the 
greater  premium  of  insurance  did  it  require  to  tempt  the  lender.  At 
Rome,  while  the  republican  form  of  government  lasted,  the  interest 
of  money  was  enormous,  as  it  was  natural  to  suppose,  even  if  it 
were  not  a  matter  of  history.  The  debtors,  who  are  always  the 
plebeians,  were  continually  threatening  their  patrician  creditors.  The 
laws  of  Mahomet  have  prohibited  loans  at  interest ;  and  what  is  the 
consequence  in  the  Mussulman  dominions?  Money  is  lent  at  in- 
terest, but  the  lender  must  be  indemnified  for  the  use  of  his  capital, 
and,  moreover,  for  the  risk  incurred  in  the  contravention  of  the 
law.  It  was  the  same  in  Christian  countries,  so  long  as  loans  at 
interest  were  illegal :  and  where  the  necessity  of  borrowing  enforced 
the  toleration  of  the  practice  amongst  the  Jews,  such  were  the 
humiliation,  oppression,  and  extortion,  to  which,  on  one  pretext  or 
another,  that  nation  was  exposed  on  this  score,  that  nothing  short 
of  a  very  heavy  rate  of  interest  could  indemnify  for  such  repeated 
loss  and  mortification.  Leters  patent  of  the  French  king  John, 
bearing  date  in  the  year  1360,  are  now  extant,  which  authorises  the 
Jews  to  lend  on  pledges  at  the  rate  of  four  deniers  per  week  for 
every  livre  of  twenty  sous,  which  is  more  than  eighty-six  per  cent, 
per  annum ;  but  in  the  year  following,  the  same  monarch,  though 
recorded  as  one  of  the  most  scrupulous  performers  of  his  royal  word 
that  our  annals  can  boast  of,  caused  the  quantity  of  pure  metal  con- 
tained in  the  coin  to  be  reduced ;  so  that  the  lenders  no  longer 
received  back  a  value  equal  to  what  they  had  lent. 

This  explanation  will  alone  suffice  to  justify  the  very  heavy  in- 
terest demanded,  without  at  all  taking  into  calculation,  that  at  a  period, 
when  loans  were  negotiated,  not  to  forward  industrious  enterprises, 
but  to  support  war,  to  feed  extravagance,  and  to  further  the  most 
hazardous  projects;  at  a  period  when  laws  were  powerless,  and 
lenders  unable  legally  to  enforce  their  claims  against  their  debtors, 
it  required  a  very  ample  premium  to  cover  the  risk  of  non-payment. 
In  fact,  the  premium  of  insurance  absorbed  the  far  greater  part  of 
what  passed  under  the  name  of  interest,  or  usury:  and  the  actual  bona 
fide  interest,  the  rent  for  the  use  of  capital  lent,  was  reduced  to  a 
very  trifle;  for,  though  capital  was  scarce,  there  is  reason  to  suppose, 
that  productive  employment  was  still  more  so.  Of  the  86  per  cent 
interest  paid  in  the  reign  of  king  John,  perhaps  not  more  than  3  01 
4  per  cent,  was  the  equivalent  for  the  productive  service  of  the 
capital  advanced ;  for  all  productive  labour  is  better  paid  now,  than 
it  was  in  those  days ;  and  even  now-a-days  the  rent  of  capital  can 
scarcely  be  reckoned  higher  than  5  per  cent. ;  the  excess  is  so  much 
premium  of  insurance  for  the  lender's  indemnity. 

2T 


340  ON  DISTRIBUTION.  BOOK  II 

Thus,  the  ratio  of  the  premium  of  insurance,  which  frequently 
forms  the  greater  portion  of  what  is  called  interest,  depends  on  the 
degree  of  security  presented  to  the  lender ;  which  security  consists 
chiefly  in  three  circumstances : — 1.  The  safety  of  the  mode  of 
employment;  2.  The  personal  ability  and  character  of  the  borrower, 
3.  The  good  government  of  the  country  he  happens  to  reside  in. 
We  have  just  seen,  how  much  the  hazardous  purposes,  to  which  loans 
were  applied  in  the  middle  ages,  enhanced  the  premium  of  insurance 
necessarily  paid  to  the  lender. 

It  is  the  same  with  all  perilous  investments  of  capital,  with  a  dif- 
ference in  degree  only.  The  Athenians  of  old,  made  a  distinction 
between  marine  interest,  or  interest  of  capital  afloat,  and  land- 
interest,  or  interest  on  shore ;  the  former  was  rated  at  30  per  cent 
more  or  less  per  voyage,  whether  to  the  Euxine,  or  to  any  port  in 
the  Mediterranean.*  As  two  such  voyages  were  accomplished  with 
ease  in  the  year,  the  annual  marine  interest  may  be  rated  at  about  60, 
while  other  interest  was  commonly  not  more  than  12  per  cent. 
Supposing  that,  of  the  12  per  cent,  one  half  was  assigned  to  cover 
the  risk  of  the  lender ;  we  shall  find,  that  the  mere  annual  rent  or 
hire  of  money  at  Athens,  was  6  per  cent,  only,  which  I  should  still 
tnink  above  the  mark;  yet,  supposing  it  to  have  been  so  high,  the 
marine  interest  allowed  54  per  cent,  for  insurance  of  the  lender's 
risk.  So  enormous  a  premium  must  be  attributed  in  part  to  the  bar- 
barous habits  then  prevalent  among  the  nations  with  whom  they 
traded;  for  different  nations  were  then  much  greater  strangers  to 
each  other,  than  they  are  at  present,  and  commercial  laws  and  cus- 
toms much  less  respected ;  and  in  part  to  the  imperfections  of  the 
art  of  navigation.  There  was  more  danger  in  a  voyage  from  the 
Piraeus  to  Trapezus,  though  but  three  hundred  leagues  distant,  than 
there  is  now  in  one  from  L'Orient  to  China,  which  is  a  distance  of 
seven  thousand.  Thus,  the  improvements  of  geography  and  navi- 
gation have  contributed  to  lower  the  rate  of  interest,  and  ultimately 
to  reduce  the  cost  price  of  products.  Loans  are  sometimes  contract- 
ed not  for  a  productive  investment,  but  for  mere  barren  consumption. 
Transactions  of  this  kind  should  always  awaken  the  suspicion  of  the 
lender,  inasmuch  as  they  engender  no  means  of  repayment  of  either 
principal  or  interest.  If  charged  upon  a  growing  revenue,  they  are, 
at  all  events,  an  anticipation  of  that  revenue ;  and  if  charged  upon 
any  of  the  sources  of  revenue,  they  afford  the  means  of  dissipating 
the  particular  source  itself.  If  there  be  the  security  neither  of  reve- 
nue nor  of  its  source,  they  barely  place  the  property  of  one  person 
nt  the  wanton  disposition  of  another. 

Among  the  circumstances  incident  to  the  nature  of  the  employ- 
ment, which  influence  the  rate  of  interest,  the  duration  of  the  loan 
must  not  be  forgotten ;  ceteris  paribus,  interest  is  lower  when  the 
lender  can  withdraw  his  funds  at  pleasure,  or  at  least  in  a  very  short 
period  ;  and  that  both  on  account  of  the  positive  advantage  of  having 
capital  readily  at  command,  and  because  there  is  less  dread  of  a  •nsk, 

*  Voyage  d1  Anacharsis,  torn.  iv.  p.  371. 


CHAP.  VIII.  ON  DISTRIBUTION.  JM7 

which  may  probably  be  avoided  by  timely  retreat.  The  facility  of 
immediate  negotiation  presented  by  the  transferable  bills  and  notes 
of  modern  governments,  is  one  principal  cause  of  the  low  rate  of 
interest,  at  which  many  oi  these  governments  are  enabled  to  bor- 
row, (a)  This  interest,  in  my  opinion,  hardly  covers  the  risk  of  the 
lender ;  but  he  always  reckons  on  the  certainty  of  selling  his  securi- 
ties before  the  moment  of  catastrophe,  should  any  serious  alarm  be 
entertained.  The  public  securities  that  are  not  negotiable,  bear  a 
much  higher  interest ;  such,  for  instance,  as  the  old  personal  annui- 
ties in  France,  which  the  government  generally  sold  at  the  rate  of  10 
per  cent,  a  high  average  for  young  lives.  Wherefore  the  Genevese 
acted  with  excellent  judgment,  in  settling  their  annuities  on  thirty 
lives  of  well-known  public  characters.  By  this  means,  they  made 
their  annuities  negotiable,  and  so  contrived  to  get  the  rate  of  interest 
of  securities  not  negotiable,  upon  securities  that  were  negotiable. 

About  the  vast  influence  of  personal  character  and  ability  in  the 
borrower,  in  determining  the  amount  of  the  premium  of  insurance  to 
the  lender,  there  can  be  no  doubt  whatever :  they  are  the  basis  of 
what  is  called  personal  credit ;  and  it  is  hardly  necessary  to  say, 
that  a  person  in  good  credit  borrows  at  a  cheaper  rate,  than  another 
who  has  none. 

Next  to  approved  integrity  and  probity,  what  most  contributes  to 
the  credit  of  an  individual  or  of  a  government,  is  past  punctuality  in 
performance  of  engagements;  this  is,  in  fact,  the  very  corner-stone 
of  credit,  and  one  that  seldom  proves  insecure.  But  why,  it  may  be 
asked,  may  not  a  man  who  has  never  yet  made  default  in  his  pay- 
ment, fail  the  very  next  moment  ?  There  is  very  little  probability 
that  he  will,  especially  if  his  punctuality  be  of  long  standing.  For, 
to  have  been  ever  punctual  in  his  payments,  he  must  either  have 
always  been  possessed  of  value  in  hand  sufficient  to  meet  demands 
upon  him ;  that  is  to  say,  he  must  have  been  a  man  of  property  over 
and  above  his  debts,  which  is  the  best  possible  ground  of  trust ;  or 
else  he  must  have  managed  matters  so  well,  and  have  speculated  with 
so  much  judgment  and  safety,  as  always  to  have  had  his  returns 
arrive  before  the  calls  became  due;  thus  evincing  a  degree  of  ability 
and  prudence,  wrhich  afforded  an  excellent  guarantee  for  his  future 
punctuality.  The  converse  of  this  is  the  reason,  why  a  merchant, 
that  has  once  failed  or  hesitated  in  the  performance  of  his  engage- 
ments, thenceforward  loses  his  credit  entirely. 

Finally,  the  good  government  of  the  country,  where  the  debtor 
resides,  reduces  the  risk  of  the  creditor,  and  consequently,  the  pre- 
mium of  insurance  he  is  obliged  "to  demand  to  cover  that  risk. 
Hence  it  is,  that  the  rate  of  interest  rises,  whenever  the  laws  and 
their  administration  do  not  insure  the  performance  of  engagements. 

(a)  This  is  strongly  illustrated  by  the  unfunded  and  the  funded  debt  of  Great 
Britain.  The  former,  in  the  shape  of  exchequer  and  treasury  bills,  bears  a  rate 
of  interest  considerably  lower  than  the  latter  in  the  shape  of  stock ;  because  the 
bills  are  convertible  readily  at  par;  whereas,  the  usual  rise  and  fall  of  the  capital 
etock  is  much  greater,  than  the  interest  upon  it  for  short  periods.  T. 


348  ON  DISTRIBUTION  BOOK  II. 

It  is  yet  more  aggravated,  when  they  excite  to  the  violation  of  them; 
as  when  they  authorise  non-payment,  or  do  not  acknowledge  the 
validity  of  bonafide  contracts. 

The  resort  to  personal  restraint  against  insolvent  debtors  has  been 
generally  considered  as  injurious  to  the  borrower ;  but  is,  on  the  con- 
trary, much  in  his  favour.  Loans  are  made  more  willingly,  and  on 
better  terms,  where  the  rights  of  the  lender  are  best  secured  by 
law.  (a)  Besides,  the  encouragement  to  accumulate  capital  is  thereby 
nlarged ;  whenever  individuals  mistrust  the  mode  of  investing  their 
savings,  there  is  a  strong  inducement  to  every  one  to  consume  the 
whole  of  his  income,  and  this  consideration  will,  perhaps,  help  to 
explain  a  curious  moral  phenomenon;  namely,  that  irresistible  avidity 
for  excessive  enjoyment,  which  is  a  common  symptom  in  times  of 
political  turbulence  and  confusion.* 

However,  while  on  the  subject  of  the  necessity  of  personal  severity 
towards  debtors,  I  cannot  recommend  the  practice  of  imprisonment; 
to  confine  a  debtor  is  to  command  him  to  discharge  his  debts,  and  at 
the  same  time  deprive  him  of  the  means  of  so  doing.  There  seems 
more  reason  in  the  Hindu  institution,  giving  the  creditor  the  option 
of  seizing  the  person  of  his  insolvent  debtor,  and  confining  him  at 
the  creditor's  own  home  to  compulsory  labour,  for  the  creditor's 
benefitf  But,  whatever  be  the  means,  whereby  the  public  authority 
enforces  the  payment  of  debts,  they  must  always  be  ineffective,  if 
law  be  partially  or  capriciously  administered.  The  moment  a  debtor 
is,  or  hopes  to  be,  out  of  his  creditor's  reach,  there  is  a  risk  to  be  run 
by  the  creditor,  which  is  of  value,  and  must  be  indemnified. 

After  having  thus  detached  from  the  rate  of  bare  interest  all  that 
is  paid  as  premium  of  insurance  to  the  lender  against  the  risk  of  total 
or  partial  loss  of  his  capital,  it  remains  to  consider  that  part,  which 
is  purely  and  simply  interest ;  that  is  to  say,  rent  paid  for  the  utility 
and  the  use  of  capital. 

Now  this  portion  of  the  gross  sum  called  interest  is  larger  in  pro- 


*  See  the  description  of  the  Plague  at  Florence,  as  given  after  Boccaccio  by 
Sismondi,  in  his  admirable  Histoire  des  Republiques  d'ltalie.  A  similar  effect 
was  observed  at  several  of  the  most  dreadful  epochs  of  the  French  revolution. 

t  Raynal,  Histoire  Philosophique,  torn.  i. 

(a)  The  personal  restraint  of  the  debtor  has  nowhere  been  carried  to  such 
extreme  length  as  in  England.  Not  only  was  a  debtor  at  one  time  liable  to 
imprisonment  pendent  lite,  and  before  the  debt  was  legally  established,  and  that 
for  the  smallest  sum ;  but  the  term  of  his  imprisonment  in  execution  after  judg- 
ment, was  absolutely  unlimited.  The  hardship,  in  both  these  particulars,  was 
partially  remedied  before  the  erection  of  our  insolvent  code  ;  and  that  code  has 
Btill  further  alleviated  the  condition  of  the  debtor.  But  the  whole  system  is 
vitiated,  and  in  a  great  measure,  neutralised,  by  total  neglect  of  all  measures 
for  the  prevention  of  insolvency,  in  limine.  The  grand  expedient  is,  publicity 
of  property  ;  which,  in  the  first  place,  gives  the  creditor  the  means  of  estimating 
beforehand,  ana  with  more  accuracy,  the  grounds  and  fair  extent  of  his  debtor's 
credit ;  and  in  the  next,  enables  him,  in  case  of  default,  to  resort  to  those  means, 
instead  of  endeavouring  to  discover  or  extort  them  by  personal  restraint.  Thus 
*  is,  *.hat  one  error  of  policy  is  sure  to  engender  another.  T 


CHAP.  VIII.  ON  DISTRIBUTION.  349 

portion  as  the  supply  of  capital  available  for  loans  is  less;  and  as  the 
demand  of  capital  for  that  specific  object  is  greater;  and  again,  that 
demand  is  the  greater  in  proportion  to  the  more  numerous  and  more 
lucrative  employments  of  capital.  Consequently,  a  rise  in  the  rate 
of  interest  does  not  infallibly  or  universally  denote,  that  capital  is 
growing  scarcer ;  for  possibly,  it  may  be  a  sign,  that  its  uses  are 
multiplied.  Smith  has  remarked  this  consequence  upon  the  close  of 
the  very  successful  war  on  the  part  of  England,  which  terminated 
with  the  peace  of  1763.*  The  rate  of  interest  then  advanced  instead 
of  declining;  the  important  acquisitions  of  England  had  opened  a 
new  field  for  her  commercial  enterprise  and  speculation;  capital  was 
not  diminished  in  quantity,  but  the  demand  for  it  was  increased;  and 
the  rise  of  interest,  which  ensued,  though  in  most  cases  a  sign  of 
impoverishment,  was,  in  this,  a  consequence  of  the  acquisition  of  new 
sources  of  wealth. 

France,  in  1812,  experienced  the  opposite  effect  of  a  cause  directly 
the  reverse.  A  long  and  destructive  war,  which  had  annihilated 
almost  all  external  communication;  exorbitant  taxation;  the  ruinous 
system  of  licenses ;  the  commercial  enterprises  of  the  government 
itself;  frequent  and  arbitrary  alterations  in  the  duties  on  import; 
confiscation,  destruction,  vexation;  in  fine,  a  system  of  administration 
uniformly  avaricious  and  hostile  to  private  interest,  had  rendered  all 
enterprises  of  industry  difficult,  hazardous  and  ruinous  in  the  ex- 
treme. The  aggregate  capital  of  the  nation  was  probably  on  the 
decline;  but  the  beneficial  employment  of  it  became  still  more. rare 
as  well  as  dangerous ;  so  much  so,  that  interest  never  fell  so  low  in 
France  as  at  that  period;  and,  what  is  in  general  the  sign  of  extreme 
prosperity,  was  then  the  effect  of  extreme  distress. 

These  exceptions  serve  but  to  confirm  the  general  and  eternal  law, 
that  the  more  abundant  is  the  disposable  capital,  in  proportion  to  the 
multiplicity  of  its  employments,  the  lower  will  the  interest  of  bor- 
rowed capital  fall.  With  regard  to  the  supply  of  disposable  capital, 
that  must  depend  on  the  quantum  of  previous  savings.  On  this 
head,  I  must  refer  to  what  I  have  before  said  upon  the  subject  of 
the  formation  of  capital.f 

*  Wealth  of  Nations,  book  i.  c.  9. 

f  Supra,  Book  I.  chap.  11.  It  has  been  remarked  that  the  rate  of  interest  is 
usually  somewhat  lower  in  towns,  than  in  country  places.  Wealth  of  Nations, 
book  i.  c.  9.  The  reason  is  plain.  Capital  is  for  the  most  part  in  the  hands  of 
the  wealthy  residents  of  the  towns,  or  at  least  of  persons  who  resort  to  them  for 
their  business,  and  carry  with  them  the  commodity  they  deal  in,  i.  e.  capital, 
which  they  do  not  like  to  employ  at  much  distance  from  their  own  inspection. 
Towns,  and  particularly  great  cities,  are  the  grand  markets  for  capital,  perhaps 
even  more  than  for  labour  itself;  accordingly,  labour  is  there  comparatively 
dearer  than  capital.  In  the  country,  where  there  is  little  unemployed  caoital, 
the  contrary  is  observable.  Thus,  usury  is  more  prevalent  in" country  places; 
it  would  be  less  so,  if  the  business  of  lending  were  more  safe  and  in  better 
repute,  (a) 

(a)  These  remarks  are  just  in  the  main  ;  but  the  advantage  of  town  over  COUP 
try,  in  this  particular,  may  be  reduced  to  a  very  trifle,  by  the  ease  of  intern.nl 
communication.     In  England  the  difference  is  scarcely  perceptible.     T. 
30 


350  ON  DISTRIBUTION.  BOOK  II. 

If  it  be  desired,  that  capital  in  search  of  employment,  and  industry 
in  search  of  capital,  should  both  be  satisfied  in  the  fullest  manner, 
entire  liberty  of  dealing  must  be  allowed  in  all  matters  touching 
loans  at  interest.  Disposable  capital,  being  thus  left  to  itself,  will 
seldom  remain  long  unemployed;  and  there  is  every  reason  to 
believe,  that  as  much  industry  will  be  called  into  activity,  as  the 
actual  state  of  society  will  admit. 

But  it  is  essential  to  pay  a  strict  attention  to  the  meaning  of  the 
term,  supply  of  disposable  capital ;  for  this  alone  can  have  any  in- 
fluence upon  the  rate  of  interest ;  it  is  only  so  much  capital,  as  the 
owners  have  both  the  power  and  the  will  to  dispose  of,  that  can  be 
said  to  be  in  circulation.  A  capital  already  vested  and  engaged  in 
production  or  otherwise,  is  no  longer  in  the  market,  and  therefore 
no  longer  forms  a  part  of  the  total  circulating  capital ;  its  owner  is 
no  longer  a  competitor  of  other  owners  in  the  business  of  lending, 
unless  the  employment  be  one,  from  which  capital  may  be  easily 
disengaged  and  transferred  to  other  objects.  Thus,  capital  lent  to  a 
trader,  and  liable  to  be  withdrawn  from  his  hands  at  a  short  notice, 
and,  &  fortiori,  capital  employed  in  the  discount  of  bills  of  exchange, 
which  is  one  way  of  lending  among  commercial  men,  is  capital, 
readily  disposable  and  transferable  to  any  other  channel  of  employ- 
ment, which  the  owner  may  judge  convenient. 

Capital  employed  by  the  owner  on  his  own  account,  in  a  trade 
that  may  be  soon  wound  up,  in  that  of  a  grocer  for  instance,  stands 
nearly  in  the  same  predicament  The  articles  he  deals  in  find  at  all 
times  a  ready  market,  and  the  capital  thus  employed  may  be  realiz- 
ed, repaid  if  lent,  re-lent  and  re-employed  in  other  trades,  or  applied 
to  any  other  use.  It  is  always  either  in  actual  circulation,  or  at  leasl 
on  the  point  of  being  so.  Of  all  values,  the  one  most  immediately 
disposable  is  that  of  money.  But  capital  embarked  in  the  construc- 
tion of  a  mill,  or  other  fabric,  or  even  in  a  movable  of  small  dimen- 
sions, is  fixed  capital,  which  being  no  longer  available  for  any  other 
purpose,  is  withdrawn  from  the  mass  of  circulating  capital,  and  can 
no  longer  yield  any  other  benefit  than  that  of  the  product  wherein  it 
has  been  vested.  Nor  should  it  be  lost  sight  of,  that  even  though 
the  mill  or  other  fabric  be  sold,  its  value,  as  capital,  is  not  by  that 
means  restored  to  circulation ;  it  has  merely  passed  from  one  pro- 
prietor to  another.  On  the  other  hand,  the  disposable  value,  where- 
with the  buyer  has  made  the  purchase,  is  not  thrown  out  of  circula- 
tion, having  merely  passed  from  his  into  the  seller's  hands.  The 
sale  neither  increases  nor  diminishes  the  mass  of  floating  capital  ir 
the  market.  Attention  to  this  circumstance  is  essential  to  the  form 
ing  a  correct  estimate  of  the  causes,  that  determine  the  rate,  as  web 
of  interest  on  capital,  as  likewise  of  profit  accruing  from  capita! 
employed,  which  we  are  about  to  consider  presently. 

It  has  been  sometimes  supposed,  that  capital  is  multiplied  by  the 
operation  of  credit.  This  error,  though  frequently  recurring  IL 
works  professing  to  treat  of  political  econom^,  can  only  anse  from 
a  total  ignorance  of  the  nature  and  function  of  cap\dl.  Capital 


CHAP.  Vin.  ON  DISTRIBUTION.  351 

consists  of  positive  value  vested  in  material  substance,  and  not  of 
immaterial  products,  which  are  utterly  incapable  of  being  accumu- 
lated. And  a  material  product  evidently  cannot  be  in  more  places 
than  one,  or  be  employed  by  more  persons  than  one,  at  the  same 
identical  moment.  The  works,  machinery,  utensils,  provisions,  and 
stock  in  hand,  composing  the  capital  of  a  manufacturer,  may  possibly 
be  wholly  borrowed ;  in  which  case,  he  will  be  acting  upon  a  hired 
capital,  and  not  on  one  of  his  own ;  yet,  beyond  all  question  that 
capital  can  be  made  use  of  by  no  one  else,  so  long  as  it  remains 
within  his  control  and  management :  the  lender  has  parted  with  the 
power  of  otherwise  disposing  of  it  for  the  time.  A  hundred  others 
might  have  equal  security  and  credit  to  offer;  but  their  applications 
could  not  multiply  the  volume  of  disposable  capital,  and  could  have 
no  other  effect  than  to  prevent  other  capital  from  remaining  idle  and 
out  of  employ.* 

It  is  not  to  be  expected,  that  I  should  here  enter  upon  a  compu- 
tation of  the  motives  of  affection,  consanguinity,  generosity,  or 
gratitude,  which  may  occasionally  give  rise  to  the  loan  of  capital, 
or  influence  the  amount  of  interest  demanded  for  it.  Every  reader 
must  take  upon  himself  to  appreciate  the  influence  of  moral  causes 
upon  the  laws  of  political  economy,  which  alone  we  profess  to 
expound. 

To  limit  capitalists  to  the  lending  at  a  certain  fixed  rate  only,  is 
to  set  an  arbitrary  value  on  their  commodity,  to  impose  a  maximum 
of  price  upon  it,  and  to  exclude,  from  the  mass  of  floating  or  circu- 
lating capital,  all  that  portion,  whose  proprietors  cannot,  or  will 
not,  accept  of  the  limited  rate  of  interest.  Laws  of  this  description 
are  so  mischievous,  that  it  is  well  they  are  so  little  regarded  as  they 
almost  always  are,  the  wants  of  borrowers  combining  with  those  of 
lenders,  for  the  purpose  of  evading  them ;  which  is  easily  managed, 
by  stipulating  for  benefits  to  the  lender,  not  indeed  bearing  the  name 
of  interest,  although  really  the  *same  thing  in  the  end.  The  only 
consequence  of  such  enactments  is,  to  raise  the  rate  of  interest,  by 
adding  to  the  risks,  to  which  the  lender  is  exposed,  and  against 
which  he  must  be  indemnified.  It  is  somewhat  amusing  to  find  that 
those  governments,  which  have  fixed  the  rate  of  interest,  have 

*  Vide  supra,  Book  I.  chap.  10,  11,  on  the  mode  of  employing,  and  on  the 
transformation  and  accumulation  of  capital.  What  is  here  said  does  not  militate 
against  the  positions  laid  down  in  Book  I.  chap.  22.  on  the  representatives  of 
money.  A  bill  of  exchange,  with  good  names  upon  it,  is  only  an  expedient  for 
borrowing  of  a.  third  person  actual  and  positive  value,  in  the  interim  between 
the  negotiation  and  the  maturity  of  the  bill.  Bills  and  notes,  payable  on  demand, 
or  at  sight,  whether  issued  by  the  government,  or  by  private  banking-establish- 
ments, are  a  mere  substitution  of  a  cheap  paper  agent  of  circulation,  in  the  place 
of  a  costly  and  metallic  agent.  The  monetary  functions  of  the  metal  being  exe- 
cuted by  the  paper,  the  former  is  set  free  for  other  objects;  and,  inasmuch  as  it 
is  exchangeable  for  other  commodities  or  implements  of  industry,  a  positive 
accession  is  made  by  the  substitution  to  the  natural  capital ;  but  no  further.  The 
degree  of  the  accession  is  limited  strictly  to  the  amount  of  value  required  for 
the  business  of  circulation,  and  dispensed  with  by  this  expedient;  which  amount 
is  a  mere  trifle,  in  comparison  with  the  total  value  of  the  national  capital 


352  ON  DISTRIBUTION.  BOOK  II. 

almost  invariably  themselves  set  the  example  of  breaking  their  own 
laws,  by  borrowing  at  higher  than  legal  interest  in  their  own  case. 
That  interest  should  be  fixed  by  law  is  highly  proper  and  neces- 
sarv;  but  it  should  be  fixed  only  in  cases,  where  there  is  no  previous 
agreement  about  it ;  as  in  the  case  of  a  legal  recovery  of  a  sum  with 
interest.  And,  in  such  case,  I  think  the  interest  fixed  by  law  should 
be  estimated  at  the  lowest  rate  that  is  usually  paid  by  individuals ; 
because  the  lowest  rate  is  that  paid  by  the  safest  investments.  Now, 
it  is  quite  consistent  with  justice,  that  the  withholder  of  capital  should 
restore  it  even  with  interest;  but  that  is  in  the  supposition,  that  it  has 
remained  all  the  while  in  his  possession ;  which  it  cannot  be  supposed 
to  have  done,  without  his  having  invested  it  in  the  way  the  least 
hazardous,  and  consequently  without  his  having  drawn  from  it  at 
least  the  lowest  interest  it  would  have  afforded. 

But  this  rate  should  not  be  denominated  the  legal  interest,  because 
the  rate  of  interest  ought  no  more  to  be  restricted,  or  determined  by 
law,  than  the  rate  of  exchange,  or  the  price  of  wine,  linen,  or  any 
other  commodity.  And  this  is  the  proper  place  to  expose  a  very 
prevalent  error. 

Capital,  at  the  moment  of  lending,  commoily  assumes  the  form 
of  money;  whence  it  has  been  inferred,  that  abundance  of  money 
is  the  same  thing  as  abundance  of  capital ;  and,  consequently,  that 
abundance  of  money  is  what  lowers  the  rate  of  interest.  Hence  the 
erroneous  expressions  used  by  men  of  business,  when  they  tell  us, 
that  money  is  scarce,  or  that  money  is  plentiful ;  which,  it  must  be 
confessed,  are  equally  just  and  appropriate,  as  the  very  incorrect 
term,  interest  of  money.  The  fact  is,  that  abundance  or  scarcity  of 
money,  or  of  its  substitute,  whatever  it  may  be,  no  more  affects  the 
rate  of  interest,  than  abundance  or  scarcity  of  cinnamon,  of  wheat, 
or  of  silk.  The  article  lent  is  not  any  commodity  in  particular,  01 
even  money,  which  is  itself  but  a  commodity,  like  all  others ;  but  it 
is  a  value  accumulated  and  destinetl  to  beneficial  investment. 

A  man,  who  is  about  to  lend,  converts  into  money  the  aggregate 
value  he  means  to  devote  to  that  particular  purpose ;  and  the  borrower 
no  sooner  has  it  at  command,  than  he  exchanges  it  for  something 
else;  the  money  that  has  effected  this  operation,  forthwith  served  to 
effect  other  similai  or  dissimilar  operations;  the  payment  of  a  tax 
perhaps,  or  the  subsidy  of  an  army.  The  value  lent  has  but  for  a 
moment  assumed  the  form  of  money,  in  the  same  manner,  as  we  have 
traced  revenue  received  and  expended,  passing  through  the  same 
temporary  form ;  the  identical  pieces  of  money  serving  perhaps  a 
hundred  times  in  the  course  of  a  year,  to  transfer  equivalent  portions 
of  income.  So,  likewise,  the  same  sum  of  money,  that  has  served 
to  transfer  a  value  from  the  hands  of  one  lender  into  those  of  a  bor- 
rower, may,  after  infinite  intervening  transfers,  perform  the  like 
office  between  a  second  borrower  and  lender,  without  stripping  the 
former  borrower  of  any  part  of  the  value  he  has  received.  In 
reality,  then,  it  is  value  which  has  been  borrowed,  and  not  any  par- 
ticular sort  of  metal  or  of  merchandise.  All  kinds  of  merchandise 


CHAP.  VIII.  ON  DISTRIBUTION.  353 

may  be  lent  and  borrowed,  as  well  as  money ;  nor  does  the  rate  of 
interest  at  all  depend  upon  the  quality  of,  the  object  lent  or  borrowed. 
Nothing  is  more  common  in  trade,  than  to  lend  and  borrow  other 
objects  than  money.  When  a  manufacturer  buys  the  raw  material 
of  his  business  at  a  certain  credit,  he,  in  fact,  borrows  the  wool,  or 
cotton,  as  the  case  may  be,  making  use  of  the  value  of  those  materials 
in  his  concern ;  and  their  quality  has  no  influence  on  the  interest, 
with  which  he  credits  the  seller.*  The  glut  or  scarcity  of  the  com- 
modity lent  only  affects  its  relative  price  to  other  commodities,  and 
has  no  influence  whatever  on  the  rate  of  interest  upon  its  advance 
or  loan.  Thus,  when  silver  money  lost  three-fourths  of  its  former 
relative  value,  although  four  times  as  much  of  it  was  necessary  to 
pass  a  loan  of  the  same  extent  of  capita],  the  rate  of  interest  remain- 
ed unaltered.  The  quantity  of  specie  or  money  in  the  market,  might 
increase  tenfold,  without  multiplying  the  quantity  of  disposable,  or 
circulating  capital.f 

Wherefore,  it  is  a  great  abuse  of  words,  to  talk  of  the  interest  of 
money ;  and  probably  this  erroneous  expression  has  led  to  the  false 
inference,  that  the  abundance  or  scarcity  of  money  regulates  the  rate 
of  interestj  Law,  Montesquieu,  nay,  even  the  judicious  Locke,  in 
a  work  expressly  treating  of  the  means  of  lowering  the  interest  of 
money,  have  all  fallen  into  this  mistake ;  and  it  is  no  wonder  that 
others  should  have  been  misled  by  their  authority.  The  theory  of 

*Many  loans  on  interest  are  made  without  bearing  that  name,  and  without 
implying  a  transfer  of  money.  When  a  retail  dealer  supplies  his  shop  by  buying 
of  the  manufacturer  or  wholesale  dealer,  he  borrows  at  interest,  and  repays, 
either  at  a  certain  term,  or  before  it,  retaining  the  discount,  which  is  but  the 
return  of  the  interest  charged  him  in  addition  to  the  price  of  the  goods.  When 
a  provincial  dealer  makes  a  remittance  to  a  banker  at  Paris,  and  afterwards 
draws  upon  his  banker,  he  lends  to  him,  during  the  time  that  elapses  between 
the  arrival  of  the  remittance  and  the  payment  of  the  draft.  The  interest  of  this 
advance  is  allowed  in  the  interest  account  which  the  banker  annexes  to  the 
merchant's  account  current  In  the  Cours  d'Economie  Politique,  compiled  by 
Storch,  for  the  instruction  of  the  young  grand-dukes  of  Russia,  and  printed  at 
Petersburgh,  torn.  vi.  p.  108,  we  are  informed,  that  the  English  merchants,  or 
factors,  settled  in  Russia,  sell  to  their  customers  at  a  credit  of  twelve  months, 
which  enables  the  Russian  purchaser  of  current  articles,  to  realize  long  before 
the  day  of  payment,  and  turn  the  proceeds  to  account  in  the  interim ;  thereby 
operating  with  English  capital,  never  intended  to  be  so  employed.  It  is  to  be 
presumed,  that  the  English  indemnify  themselves  for  this  loss  of  interest,  by  the 
additional  price  of  their  goods.  But  the  average  rate  of  profit  upon  capital  in 
Russia  is  so  high,  that  even  this  round-about  way  of  borrowing  is  sufficiently 
profitable  to  the  native  dealers. 

fThis  is  no  contradiction  to  the  former  position,  that  the  precious  metals  form 
part  of  the  capital  of  society.  They  form  an  item  of  capital,  but  not  of  disposable, 
or  lendable  capital ;  for  they  are  already  employed,  and  not  in  search  of  employ- 
ment;— employed  in  the  business  of  circulating  value  from  one  hand  to  another. 
It'  their  supply  exceed  the  demand  for  this  object,  they  are  sent  to  other  parts, 
where  their  price  continues  higher;  if  their  general  abundance  lower  their  price 
everywhere,  the  sum  of  their  value  is  not  increased,  but  a  laiger  quantity  of 
them  is  given  in  exchange  for  the  same  value  in  other  commodities. 

\  If  interest  were  always  low  in  proportion  to  the  greater  supply  of  money,  it 
would  be  lower  in  Portugal,  Brazil,  and  the  West  Indies,  than  in  Germany, 
Switzprland,  &c.,  which  is  by  no  means  the  case. 

30*  2U 


354  ON  DISTRIBUTION. 

interest  was  wrapped  in  utter  obscurity,  until  Hume  and  Smith* 
dispelled  the  vapour.  Nor  will  it  ever  be  clearly  comprehended, 
except  by  such  as  shall  have  acquired  a  correct  notion  of  what  has, 
throughout  this  work,  been  denominated  capital,  and  shall  proceed 
in  the  conviction,  that  the  object  lent  or  borrowed,  is  not  a  particular 
commodity  or  object  of  merchandise,  but  a  portion  of  value, — of  the 
aggregate  value  of  the  capital  available  for  that  object;  and  that  the 
pe?  centage  paid  for  the  use  of  this  portion  of  capital,  at  all  times 
and  places,  depends  on  the  relative -supply  and  demand  of  capital  to 
be  lent,  and  is  wholly  independent  of  the  specific  form  or  quality 
of  the  commodity,  wherein  the  loan  is  made,  whether  it  be  money, 
or  any  other  article  whatever. 


SECTION  n. 
Of  the  Profits  of  Capital 

We  have  now  sufficiently  considered  the  nature  and  motive  of  the 
interest  paid  by  the  borrower  to  the  lender  of  capital,  and,  though 
it  appears  pretty  plainly,  that  this  interest  is  compounded  of  the  rent 
of  the  capital,  and  of  the  premium  of  insurance  against  the  risk  of 
its  partial  or  total  loss,  we  have  also  seen  enough,  to  comprehend 
the  ex'reme  difficulty  of  severing  and  distinguishing  these  two 
ingredients. 

Let  us  then  proceed,  in  the  next  place,  to  investigate  the  causes  of 
the  profit  derivable  from  the  employment  of  capital,  whether  by  a 
borrower  or  by  the  proprietor  himself:  to  which  end  it  will  be 
necessary,  in  the  outset,  to  sever  it  from  the  profit  of  the  industry, 
that  turns  it  to  account ;  and  here  again  we  shall  meet  with  the 
greatest  difficulty,  in  drawing  the  line  of  distinction ;  though  it  is 
easy  to  perceive,  that  these  two  classes  of  profit,  generally  speaking, 
are  combined  in  the  recompense  or  portion  of  the  adventurer.  Smith, 
and  most  of  the  English  writers  on  this  science,  have  omitted  to 
notice  this  distinction;  they  comprise  under  the  general -head  of  the 
profit  of  capital,  or  stock,  as  they  term  it,  many  items,  which  evi- 
dently belong  to  the  head  of  the  profit  of  industry.f 

*  Essays  of  D.  Hume,  part  ii.  ess.  4.  Wealth  of  Nations,  book  ii.  c.  4.  It 
is  well  for  the  student  in  political  economy,  that  Locke  and  Montesquieu  have 
not  written  more  upon  it ;  for  the  talent  and  ingenuity  of  a  writer  serve  only  to 
perplex  a  subject  he  is  not  thoroughly  acquainted  with.  To  say  the  truth,  a 
man  of  lively  wit  can  not  satisfy  his  own  mind  without  a  degree  of  speciousness 
and  plausibility,  which  is  of  all  things  the  most  dangerous  to  the  generality  of 
readers,  who  are  not  sufficiently  grounded  in  principle  to  discover  an  error  at 
first  sighu  In  those  sciences,  which  consist  in  mere  compilation  and  classifica- 
tion, as  in  botany  or  natural  history,  one  can  scarcely  read  too  much ;  but  in 
those  deoendent  upon  the  deduction  of  general  laws  from  particular  facts,  the 
better  course  is  to  read  little,  and  select  that  little  with  judgment. 

\  This  omission  is  justified  by  Smith,  on  the  following  grounds.  "  Let  us 
suppose,'  savs  he,  "that  in  some  particular  place,  where  the  common  annual 


CHAP.  VIIL  ON  DISTRIBUTION.  355 

Perhaps  an  approximation  may  be  made  to  the  accurate  appre- 
ciation of  that  part  of  the  aggregate  profit,  which  appertains  to  the 
capital,  and  that,  which  appertains  to  the  industry  employing  it, 
respectively,  by  comparing  the  mean  ratio  of  total  profit  with  the 
mean  ratio  of  the  difference  of  profit  in  the  same  line  of  business, 
which  seems  a  fair  index  of  the  difference  of  the  skill  and  labour 
engaged.  We  will  suppose  two  houses,  in  the  fur  trade  for  example, 
to  work  each  upon  a  capital  of  100,000  dollars,  and  to  make  on  the 
average,  an  annual  profit,  the  one  of  24,000  dollars,  the  other  of 
6000  dollars  only;  a  difference  of  18,000  dollars  fairly  referable  to 
the  different  degree  of  skill  and  labour,  the  mean  of  which  is  9000 
dollars ;  this  may  be  considered  as  the  gains  of  industry,  which,  de- 
ducted from  15,000  dollars,  the  mean  profit  of  the  trade,  will  leave 
6000  dollars  for  the  profit  of  the  capital  embarked  in  it 

This  example  I  could  suggest  as  a  means,  rather  of  distinguishing 
those  items  of  profit  thus  mixed  up  together,  than  of  estimating 
their  respective  ratio  with  any  tolerable  certainty.  But,  without 
any  index  to  the  precise  line  of  demarkation  between  the  profits  of 
capital  and  those  of  the  industry  employing  it,  we  may  take  it  for 
granted,  that  the  former  will  always  be  proportionate  to  the  risk  of 
partial  or  total  loss,  and  to  the  duration  of  the  employment.  In 
practice,  adventurers,  having  capital  at  their  command,  always  weigh 
beforehand  the  advantages  and  disadvantages  of  the  different  modes 
of  investment,  as  specified  above,*  and  naturally  prefer,  ceteris  pari- 
bus,  those  presenting  the  smallest  risk  and  the  quickest  return ;  so 
that  there  is  less  competition  of  capital  for  hazardous  and  long- 
winded  adventurers ;  indeed,  none  whatever  is  embarked  in  them, 
unless  they  hold  out  a  rate  of  profit  so  much  above  the  average  rate, 
as  to  tempt  the  capitalist  to  run  the  risk.  Theory,  therefore,  leads 
to  the  presumption,  which  is  confirmed  by  the  test  of  experience, 
that  the  profit  of  capital  is  high,  in  proportion  to  the  hazard  of  the 
adventure,  and  to  the  length  of  its  duration.  . 

When  a  particular  employment  of  capital,  the  trade  with  China, 

profits  of  a  manufacturing  stock  are  10  per  cent,  there  are  two  different  manu- 
factures, in  one  of  which  the  coarse  materials  annually  wrought  up  cost  only 
700Z.,  while  the  finer  materials  in  the  other  cost  7000J.  If  the  labour  in  each 
cost  300J.  per  annum,  the  capital  employed  in  the  one  will  amount  only  to  1000Z.; 
whereas  that  employed  in  the  other  will  amount  to  7300/.  At  the  rate  of  10 
per  cent.,  therefore,  the  undertaker  of  the  one  will  expect  a  yearly  profit  of  100J. 
only,  and  that  of  the  other  7301. ;"  and  he  goes  on  to  infer,  "  that  the  profit  is  in 
proportion  to  the  capital,  and  not  to  the  labour  and  skill  of  inspection  and  direc- 
tion." But  the  instance  put  is  altogether  inconclusive ;  and  it  is  equally  easy  tc 
suppose  the  case  of  two  manufactures,  carried  on  in  the  same  place,  and  in  the 
same  line,  each  with  an  equal  capital  of  1000/.  the  one  under  the  conduct  of  an 
active,  frugal,  and  intelligent  manager,  the  other  under  that  of  an  idle,  ignorant, 
and  extravagant  one ;  the  former  yielding  a  profit  of  150Z.  per  annum,  the  latter 
one  of  50t.  only.  The  difference  in  this  case  will  arise,  not  from  any  difference 
in  the  respective  capitals  employed,  but  from  the  difference  in  the  skill  and  in- 
dustry employing  them ;  which  latter  qualities  will  be  more  productive  in  tiii« 
one  instance  than  in  the  other. 
*  Book  II.  chap.  7.  sect  3. 


356  ON  DISTRIBUTION.  BOOK  II. 

for  instance,  does  not  afford  a  profit  proportionate,  not  only  to  the 
time  of  the  detention,  but  likewise  to  the  danger  of  loss,  and  the 
inconvenience  of  a  long,  perhaps  a  two  years'  duration  of  one  single 
operation  before  the  returns  come  to  hand,  a  proportion  of  the  capital 
is  gradually  withdrawn  from  that  channel ;  the  competition  slackens, 
and  the  profits  advance,  until  they  rise  high  enough  to  attract  fresh 
capital.* 

This  will  serve  also  to  explain,  why  the  profits,  derivable  from 
a  new  mode  of  employment,  are  larger  than  those  of  common  and 
ordinary  employments,  where  the  production  and  consumption  have 
been  well  understood  for  years.  In  the  former  case,  competition  is 
deterred  by  the  uncertainty  of  success ;  in  the  latter,  allured  by  the 
security  of  the  employment. 

In  short,  in  this  matter,  as  in  all  others,  where  the  interests  of 
mankind  clash  one  with  another,  the  ratio  is  determined  by  the  re- 
lative demand  and  supply  for  each  mode  of  employment  of  capita] 
respectively. 

It  is  a  maxim  with  Smith  and  those  of  his  school,  that  human 
labour  was  the  first  price, — the  original  purchase-money,  paid  for 
all  things.  They  have  omitted  to  add,  that  for  every  object  of  pur- 
chase, there  is,  moreover,  paid,  the  agency  and  co-operation  of  the 
capital  employed  in  its  production.  Is  not  capital  itself,  they  will 
say,  composed  of  accumulated  products, — of  accumulated  labour'' 
Granted :  but  the  value  of  capital,  like  that  of  land,  is  distinguishable 
from  the  value  of  its  productive  agency;  the  value  of  a  field  is  quite 
different  from  that  of  its  annual  rent.  When  a  capital  of  1000  dol- 
lars is  lent,  or  rather  lent  on  hire,  for  a  year,  in  consideration  of  50 
dollars  more  or  less,  its  agency  is  transferred  for  that  space  of  time, 
and  for  that  consideration;  besides  the  50  dollars,  the  lender  receives 
back  the  whole  principal  sum  of  1000  dollars,  which  is  applicable 
to  the  same  objects  as  before.  Thus,  although  the  capital  be  itself  a 
pre-existent  product,  the  annual  profit  upon  it  is  an  entirely  new  one, 
and  has  no  reference  to  the  industry,  wherein  the  capital  originated. 

Wherefore  when  a  product  is  ultimately  completed  by  the  aid  of 
capital,  one  portion  of  its  value  must  go  to  recompense  the  agency 
of  the  capital,  as  well  as  another  to  reward  that  of  the  industry,  that 
have  concurred  in  its  production.  And  the  portion  so  applied  is 
wholly  distinct  from  the  value  of  the  capital  itself,  which  is  returned 
to  the  full  amount,  and  emerges  in  a  perfect  state  from  its  productive 
employment.  Nor  does  this  profit  upon  capital  represent  any  part 
•jf  the  industry  engaged  in  its  original  formation. 

From  all  which  it  is  impossible  to  avoid  drawing  this  conclusion, 

*  To  say  nothing  of  the  other  motives,  that  attract  industry  towards  any  par- 
licular  profession  or  repel  it  thence,  which  have  been  noticed  in  the  preceding 
chapter.  These  motives  sometimes  operate  all  in  the  same  direction,  and  then 
Uie  promts  of  both  industry  and  capital  rise  or  fall  together;  when  they  act  in 
opposite  directions,  the  difference  on  the  profit  of  capital  balances  that  on  tne 
profit  of  industry ;  or  vice  versa. 


CHAP.  VIII.  ON  DISTRIBUTION.  357 

that  the  profit  of  capital,  like  that  of  land  and  the  othei  natural 
sources,  is  the  equivalent  given  for  a  productive  service,  which 
though  distinct  from  that  of  human  industry,  is  nevertheless  its 
efficient  ally  in  the  production  of  wealth. 


SECTION  IIL 

Of  the  Employments  of  Capital  most  beneficial  to  Society. 

To  the  capitalist  himself,  the  most  advantageous  employment  of 
capital  is  that,  which  with  equal  risk  yields  the  largest  profit ;  but 
what  is  to  him  most  beneficial,  may  perhaps  not  be  so  to  the  com- 
munity at  large ;  for  capital  has  this  peculiar  faculty,  that,  besides 
being  productive  of  a  revenue  peculiar  to  itself,  it  is,  moreover,  a 
means,  whereby  land  and  industry  may  generate  a  revenue  likewise. 
This  is  an  exception  to  the  general  principle,  that  what  is  the  most 
productive  to  the  individual,  is  so  to  the  community  at  large.  A 
capital  lent  to  a  foreign  country,  may  very  probably  produce  to  the 
proprietors  and  the  nation,  the  highest  possible  rate  of  interest;  but 
can  afford  no  assistance  towards  extending  the  revenue  of  the 
national  territory,  or  for  the  national  industry,  as  it  would  do,  if 
employed  within  the  pale  of  the  nation. 

The  portion  of  capital  embarked  in  domestic  agriculture  is  em- 
ployed best  for  the  interests  of  a  nation ;  it  enhances  the  productive 
power  of  the  land  and  of  the  labour  of  a  country.  It  augments  at 
once  the  profits  of  industry  and  those  of  real  property.  Capital 
employed  under  intelligent  direction,  may  make  barren  rocks  to 
bear  increase.  The  Cevennes,  the  Pyrenees,  and  the  Pays  de  Vaud, 
present  on  every  side  the  view  of  mountains,  once  a  scene  of  unva- 
ried sterility,  now  covered  with  verdure  and  enriched  by  cultivation. 
Parts  of  these  rocks  have  been  blasted  with  gunpowder,  and  the 
shivered  fragments  employed  in  the  construction  of  terraces  one 
above  another,  supporting  a  thin  stratum  of  earth  carried  thither  by 
human  labour.  In  this  manner  is  the  barren  surface  of  the  rock 
transformed  into  shelving  platforms,  richly  furnished  with  verdure, 
and  teeming  with  produce  and  population.  The  capital  originally 
expended  in  these  laborious  improvements  might,  perhaps,  have 
produced  larger  profits  to  the  capitalist,  if  employed  in  external 
commerce;  but  probably  the  total  revenue  of  the  district  would 
have  been  inferior  in  amount. 

For  a  similar  reason,  capital  cannot  be  more  beneficially  employ- 
ed, than  in  strengthening  and  aiding  the  productive  powers  of  nature. 
Well  contrived  and  useful  machinery  produces  more  than  the  in- 
terest of  its  prime  cost;  and  besides  affording  additional  profit  to  the 
proprietor,  benefits  the  consumer  and  the  community  at  large,  to  the 
full  extent  of  the  saving  effected  by  its  means ;  for  every  thing  sa/ed 
is  so  much  gain. 

The  productive  employments,  that  rank  next  in  point  of  national 


358  ON  DISTRIBUTION.  BOOK  II 

benefit,  are  those  of  manufacture  and  internal  commerce ;  for  the 
profits  of  the  industry  they  set  in  motion  are  earned  at  home; 
whereas,  capital  embarked  in  foreign  trade  benefits  the  industry 
and  natural  resources  of  all  nations  indiscriminately. 

The  employment  of  capital,  that  tends  least  to  the  national  advan- 
tao'e,  is  the  carrying  trade  between  one  foreign  country  and  another. 
When  a  nation  is  possessed  of  an  immense  accumulation  of  capi- 
tal, it  will  do  well  to  embark  it  in  all  these  different  channels  of 
industry;  for  they  are  all  lucrative,  and  in  nearly  equal  degree  to 
the  capitalist,  though  in  very  different  degrees  to  the  nation  at  large. 
What  prejudice  can  arise  to  the  lands  of  Holland,  which  are  already 
in  a  high  state  of  cultivation  and  management,  and  want  neither 
clearing  nor  enclosing,  or  what  injury  be  sustained  by  nations  pos- 
sessed of  little  territory,  like  the  old  states  of  Venice,  Genoa,  and 
Hamburg,  from  the  large  investments  of  national  capital  in  the  car- 
rying trade  1  It  flowed  into  that  particular  channel  of  employment, 
merely  because  there  was  no  other  open  to  it.  But  that  class  of 
trade,  and  generally  all  external  commerce,  is  ill  adapted  to  a  nation 
deficient  in  capital,  and  having  not  enough  to  keep  its  agriculture 
and  manufacture  in  activity ;  and  it  would  be  absurd  for  its  govern- 
ment to  give  premature  encouragement  to  those  external  branches 
of  industry;  for  such  a  measure  would  but  check  the  employment 
of  capital  in  the  manner  best  calculated  to  increase  the  national 
revenue.  China,  though  it  is  the  largest  empire  in  the  world,  and 
must  possess  the  greatest  aggregate  revenue,  since  it  maintains  the 
most  numerous  and  dense  population,  abandons  to  foreigners  almost 
all  its  external  commerce.  Undoubtedly,  in  her  present  condition, 
she  would  be  a  gainer  by  extending  her  external  relations  of  com- 
merce; but  she  affords  a  very  striking  example  of  the  prosperity 
attainable  without  them. 

It  is  very  fortunate,  that  the  natural  course  of  things  impels 
capital  rather  into  those  channels,  which  are  the  most  beneficial  to 
the  community,  than  into  those,  which  afford  the  largest  ratio  of 
profit.  The  investments  generally  preferred  are  those  that  are 
nearest  home ;  whereof  the  first  and  foremost  is  the  improvement 
of  the  soil,  which  is  justly  considered  the  most  safe  and  permanent ; 
the  next,,  manufacture  and  internal  commerce;  and  the  last  of  all, 
external  commerce,  the  trade  of  transport,  and  the  commerce  with 
distant  nations.  The  owner  of  a  capital,  especially  of  a  moderate 
one,  will  embark  it  rather  under  his  own  superintendence,  than  in 
distant  and  remote  concerns.  He  is  apt  to  think  his  risk  too  hazard- 
ous, when  he  loses  sight  of  his  property  for  any  considerable  length 
of  .time,  when  he  consigns  it  to  strangers,  or  can  expect  only  tardy 
returns,  or  is  exposed  to  the  chances  of  litigation  with  fraudulent 
debtors,  who  may  take  advantage  of  their  unsettled  habits  of  life, 
or  of  the  laws  of  foreign  countries,  with  which  he  is  himself  unac- 
quainted Nothing,  but  the  bait  of  exclusive  privilege  and  monopoly- 
profit,  o:  the  violent  derangement  of  internal  industry,  can  induce 


CHAP.  IX.  ON  DISTRIBUTION.  359 

an  European  nation,  not  possessed  of  a  large  surplus  capital,  to 
in  the  colonial  or  East  India  trade.  (1) 


CHAPTER  IX. 

OF  THE  REVENUE  OF  LAND. 

SECTION  I. 
Of  the  Profit  of  Landed  Property* 

LAND  has  the  faculty  of  transforming  and  adapting  to  the  use  of 
mankind  an  infinity  of.  substances,  which,  without  its  intervention, 

*In  the  preceding  chapter,  I  have  given  the  interest,  precedence  of  the  profit, 
of  capital,  because  the  former  helps  to  render  the  latter  more  intelligible.  I 
have  here  adopted  a  contrary  arrangement,  because  the  consideration  of  the 
profit  of  land  elucidates  the  subject  of  rent 

(1)  [The  reasoning  of  this  whole  section  appears  to  me  to  be  unsound  and 
inconclusive.  There  is  no  distinction  in  point  of  productiveness,  between  any 
of  the  various  employments  of  capital.  There  can,  in  short,  be  no  line  drawn 
between  the  different  productive  channels,  into  which  capital  may  be  directed. 
Whatever  occupations  tend  to  supply  the  wants  and  increase  the  comforts  and 
accommodations  of  life,  are,  in  the  strictest  sense  of  the  word,  equally  produc- 
tive, and  nearly  in  the  same  proportion  augment  the  national  wealth.  The  capi- 
tal employed  in  the  carrying-trade  between  one  foreign  country  and  another  is 
as  advantageous  to  the  individual  and  nation  to  which  it  belongs,  as  the  capital 
employed  at  home.  For,  as  has  been  already  remaked  in  relation  to  the  profits 
of  industry  (vide  note  page  6)  in  the  absence  of  all  restraints,  the  profits  of  all 
the  different  employments  of  capital,  will  be  on  an  equality  or  nearly  approaching 
it,  inasmuch  as  any  material  difference  will  cause  its  diversion  to  a  more  pro* 
ductive  channel,  and  thus  restore  the  equilibrium.  In  a  word,  capital  flows  into 
the  carrying-trade  only  because  it  yields  a  greater  profit  than  it  otherwise  would 
do,  did  it  not  take  that  direction. 

Moreover,  there  is  no  exception  to  the  general  principle,  that  what  is  most 
productive  to  the  individual  is  also  so  to  the  community  at  large.  Notwithstand- 
ing the  contrary  assertion  of  our  author,  in  the  foregoing  section,  a  capital  lent 
to,  or  employed  in,  a  foreign  country,  if  it  yield  to  the  proprietors  and  nation  the 
highest  rate  of  interest,  must  necessarily  afford  the  national  revenue  as  much, 
and  extend  the  same  assistance  to  the  national  industry,  as  if  it  were  employed 
within  the  pale  of  the  nation.  If,  for  example,  a  capital  lent  abroad,  give  em- 
ployment to  foreign  industry  and  natural  agents,  it  is  because  its  productive 
service,  when  things,  I  must  again  repeat,  are  left  to  take  their  natural  course, 
will  yield  a  larger  revenue  to  its  owners.  Were  not  this  the  case,  this  capital 
would  not  seek  employment  abroad,  but  remain  at  home.  The  revenue  produced 
by  capital  employed  abroad,  if  the  proprietor  does  not  himself  at  the  same  time 
emigrate  there,  must  be  the  means  of  calling  into  activity,  and  giving  a  greater 
development  to  the  productive  faculties  of  the  national  industry  and  land,  as  this 
revenue  must  be  consumed,  either  productively  or  unproductively  at  home.] 

AMERICAN  EDITOR 


jUO  ON  DISTRIBUTION.  BOOK  IL 

would  be  to  them  of  no  service ;  it  yields  nutriment  and  vegetative 
juices  to  the  grain,  the  fruits,  and  vegetables,  whereon  we  subsist;  as 
•well  as  to  the  forests,  whereof  we  construct  our  houses,  ships,  and 
furniture,  and  whence  we  derive  fuel  to  keep  us  warm.  Its  agency 
in  the  production  of  all  these  commodities  may  be  called,  the  pro- 
ductive service  of  land.  And  thence  it  is,  that  the  profit  of  the  pro- 
prietor originates. 

He  derives  a  further  benefit  from  the  useful  substances  to  be  ex- 
tracted from  its  entrails ;  the  stone,  metal,  coal,  peat,  &c.  &c. 

Land,  as  we  have  above  remarked,  is  not  the  only  natural  agent 
possessing  productive  properties;  but  it  is  the  only  one,  or  almost 
the  only  one,  which  man  has  been  able  to  appropriate,  and  turn  to 
his  own  peculiar  and  exclusive  benefit.  The  water  of  rivers  and  of 
the  ocean  has  the  power  of  giving  motion  to  machinery,  affords  a 
means  of  navigation,  and  supply  of  fish ;  it  is,  therefore,  undoubtedly 
possessed  of  productive  power.  The  wind  turns  our  mill ;  even  the 
neat  of  the  sun  co-operates  with  human  industry;  but  happily  no 
man  has  yet  been  able  to  say,  the  wind  and  the  sun's  rays  are  mine, 
and  I  will  be  paid  for  their  productive  services.  I  would  not  be 
understood  to  insinuate,  that  land  should  be  no  more  the  object  of 
property,  than  the  rays  of  the  sun,  or  blast  of  the  wind.  There  is 
an  essential  difference  between  these  sources  of  production;  the 
power  of  the  latter  is  inexhaustible ;  the  benefit  derived  from  them 
by  one  man  does  not  hinder  another  from  deriving  equal  advantage. 
The  sea  and  the  wind  can  at  the  same  time  convey  my  neighbour's 
vessel  and  my  own.  With  land  it  is  otherwise.  Capital  and  industry 
will  be  expended  upon  it  in  vain,  if  all  are  equally  privileged  to 
make  use  of  it.;  and  no  one  will  be  fool  enough  to  make  the  out- 
lay, unless  assured  of  reaping  the  benefit.  Nay,  paradoxical  as  it 
may  seem  at  first  sight,  it  is,  nevertheless,  perfectly  true,  that  a 
man,  who  is  himself  no  snare-holder  of  land,  is  equally  interested 
in  its  appropriation  with  the  share-holder  himself.  The  savage  tribes 
of  New  Zealand,  and  of  the  north-western  coast  of  America,  where 
the  land  is  unappropriated,  have  the  greatest  difficulty  in  procuring 
a  precarious  subsistence  upon  fish  and  game,  and  are  often  reduced 
to  devour  worms,  caterpillars,  and  the  most  nauseous  vermin  :*  not 
unfrequently  even  to  wage  war  on  one  another,  from  absolute  want, 
and  to  devour  their  prisoners  as  food ;  whereas,  in  Europe,  where 
the  appropriation  is  complete,  the  meanest  individual,  with  bodily 
health,  and  inclination  to  work,  is  sure  of  shelter,  clothing,  and  sub- 
tsistence,  at  the  least. 

In  preceding  chapters,  we  have  noticed  the  profit  resulting  from 
industry  and  capital,  embarked  in  agriculture  or  other  branches  of 
industry.  In  the  present,  we  are  to  inquire,  wherein  consists  the 
peculiar  profit  of  land  itself,  independent  of  that  accruing  from  the 
industry  and  capital,  devoted  to  its  cultivation ;  and  to  consider  the 

*  Malthus,  in  his  Essay  on  Population,  book  i.  c.  405,  has  given  a  detail  of 
norne  of  the  revolting  extremes,  to  which  savage  tribes  have  been  reduced  by 
U'*-  want  of  a  regular  supply  of  food. 


CBAP.  IX.  ON  DISTRIBUTION.  361 

profit  of  land  in  the  abstract,  and  whence  it  originates,  without  any 
inquiry  as  to  who  may  be  the  cultivator,  whether  the  proprietor 
himself,  or  a  tenant  under  him. 

It  is  the  declared  opinion  of  many  writers,*  that  the  value  of 
products  is  never  more  than  the  recompense  of  the  human  agency 
or  surplus,  that  can  be  set  apart  as  the  peculiar  profit  of  land,  an<l 
constitute  the  rent  paid  for  its  use  to  the  proprietor.  The  tenor  of 
their  argument  is  this :  the  proprietor  of  land  lying  waste  or  fallow 
having  also  a  capital  to  dispose  of,  may,  at  his  pleasure,  expend  it, 
either  in  cultivation,  or  in  some  other  way.  If  he  reckons  that  the 
cultivation  of  his  land  will  yield 'him  as  large  a  return  as  any  other 
investment,  he  will  give  it  the  preference;  and,  indeed,  it  is  found 
by  experience,  that  this  mode  of  investment  is  preferred,  even 
though  somewhat  less  advantageous  than  others,  as  being  at  all 
events  more  safe.  Well :  and  what  do  they  infer  from  this  ?  Why, 
that  cultivation  yields  no  return  whatever,  beyond  the  interest  of 
the  capital  engaged  in  it  ;f  and  if  so,  what  is  there  left  for  the  profit 

*  Destutt  de  Tracy.  Commentaire  sur  T Esprit  de  Lois,  c.  13.  Ricardo  (a) 
Prin.  of  Pol.  Econ.  and  Tax.  c.  2. 

f  According  to  these  writers,  even  the  interest  of  capital  is  not  given  as  the 
recompense  of  its  concurrence  in  the  business  of  production.  I  have  already 
exposed  the  fallacy  of  this  opinion,  supra,  chap.  8.  sect.  2. 

(a)  This  chapter  of  Ricardo  is  perhaps  the  least  satisfactory  and  intelligible 
of  his  whole  work.  It  goes  upon  the  principle  detailed  by  Malthus,  in  his  Essay 
on  Rent ;  viz.  that  the  ratio  of  rent  is  determined  by  the  difference  in  the  pro- 
duct of  land  of  different  qualities,  the  worst  land  in  cultivation  yielding  no  rent 
at  all.  But  there  is  a  great  deal  of  land  yielding  rent  without  any  cultivation ; 
and,  in  a  country  where  the  whole  of  the  land  is  appropriated,  none  is  ever  cul- 
tivated without  paying  some  renter  other.  The  downs  of  Wiltshire  yield  a 
rent,  without  any  labour,  or  capital,  i)eing  expended  upon  them;  so  likewise  the 
forests  of  Norway ;  this  rent  is  the  natural  product  of  the  soil ;  it  is  paid  for  the 
perception  of  that  natural  product,  between  which,  and  the  desire  for  it,  an  arti- 
ficial difficulty  is  interposed  by  human  appropriation.  The  whole  rent  is,  there- 
fore, referable,  not  to  the  quality  of  the  land  only,  but  to  the  quality  jointly  with 
the  appropriation ;  and  so  it  is  in  all  cases.  Wherever  a  difficulty  is  thus  inter- 
posed, rent  will  be  paid  upon  all  land  brought  into  cultivation ;  for  why  should 
the  proprietor  part  with  the  temporary  possession  for  nothing,  any  more  than  the 
capitalist  with  his  capital  ?  And  the  ratio  of  rent  is  determined,  not  altogether 
by  the  quality  of  the  soil,  but  by  the  intensity — 1.  Of  the  desire,  or  demand 
for  its  productive  agency  ;  2.  Of  the  artificial  difficulty  interposed  by  nature  and 
human  appropriation.  The  quality  of  the  soil  may  vary  the  intensity  of  the 
demand  for  it  beyond  all  question ;  for  the  quality  is  the  productive  agency  :  but 
the  supply  of  agricultural  industry  and  capital  in  the  market  will  also  vary  the 
proportion -of  its  product,  which  industry  and  capital  will  expect  for  themselves. 
Why  is  rent  highest,  when  a  population  is  condensed  on  a  limited  territoria. 
surface  1  because  then  the  utility  of  its  productive  qualities  is  more  strongly  felt 
and  desired,  in  consequence  of  their  intense  difficulty  and  attainment.  And  why 
is  rent  still  further  raised  by  the  prohibition  of  the  import  of  products  of  external 
agriculture?  because  the  natural  difficulty  of  obtaining  the  benefit  of  the  pft>- 
ductive  agency  of  foreign  land  is  aggravated,  by  the  artificial  difficulty  inter- 
posed by  legislative  enactments.  The  degree  of  productive  agency,  of  course, 
affects  the  amount  of  the  product ;  but  rent  originates  in  the  union  of  that 
agency,  or  utility,  with  difficulty  of  attainment,  natural  and  artificial,  and  i& 
regulated  in  its  ratio  by  their  combined  intensity.  T. 
31  2V 


362  ON  DISTRIBUTION.  BOOK  II. 

on  the  productive  powers  of  the  soil?  Evidently  nothing  whatever. 
I  have  endeavoured  to  put  the  argument  in  the  clearest  and  most 
intelligible  light;  and  I  nave  to  observe  upon  it,  that  it  proceeds 
upon  a  partial  and  imperfect  view  of  the  matter,  and  upon  a  total 
neglect  of  the  influence  of  demand  in  the  fixation  of  value.  I  will 
now  endeavour  to  give  a  more  complete  view  of  the  subject. 

The  productive  power  of  the  soil  has  no  value,  unless  where  its 
products  are  objects  of  demand.  Travellers,  who  have  explored  the 
interior  of  America,  and  other  desert  parts  of  the  globe,  make 
repeated  mention  of  tracts  of  the  richest  land,  capable  of  every  kind 
of  culture,  yet  wholly  destitute  of  any  useful  or  valuable  products. 
But  no  sooner  is  a  celony  established  in  the  vicinity,  or,  by  some 
means  or  other,  a  market  found  where  the  products  of  the  soil  will, 
in  the  way  of  exchange,  pay  the  usual  rate  of  interest  upon  the 
requisite  advances,  than  cultivation  begins  immediately.  Up  to  this 
point,  there  is  no  difference  between  us.  But  if  any  circumstance 
operate  to  aggravate  the  demand  beyond  this  point,  the  value  of 
agricultural  products  will  exceed,  and  sometimes  very  greatly  ex- 
ceed, the  ordinary  rate  of  interest  upon  capital ;  and  this  excess  it  is, 
which  constitutes  the  profit  of  land,  and  enables  the  actual  cultivator, 
when  not  himself  the  proprietor,  to  pay  a  rent  to  the  proprietor,  aftei 
having  first  retained  the  full  interest  upon  his  own  advances,  and  the 
full  recompense  of  his  own  industry. 

Land  is  an  agent  gratuitously  furnished  to  mankind  at  large,  by 
whom  it  is  afterwards  exclusively  appropriated ;  but  its  appropria- 
tion* does  not  begin  to  be  profitable  to  the  individual,  in  whoso 
favour  it  is  made,  until  its  products  are  an  object  of  demand,  and 
until  their  supply  ceases  to  be  co-extensive  with  the  desire  for  them, 
as  it  is  with  respect  to  some  other  natiral  objects,  air,  water,  &c. 

From  those  products  of  the  soil  only,  thus  raised  in  value  by  the 
demand,  can  there  accrue  that  profit  to  the  proprietor  which  has 
been  called  the  profit  of  land  ;  and  which  is  paid  in  all  civilized  coun- 
tries, and  especially  where  manufacture  and  commerce  multiply  the 
objects  of  exchange.  It  may  sometimes  happen,  that  in  a  particular 
district  of  such  a  country,  the  rent  of  land  may  be  very  trifling; 
as  in  our  own  district  of  Sologne,  where  it  is  no  more  than  20  cents 
an  acre ;  but  this  is  owing  to  the  want  of  roads,  and  particularly  of 
water-carriage,  which  makes  the  charge  of  bringing  its  agricultural 
produce  to  market,  added  to  the  charge  of  cultivation,  absorb  nearly 
the  whole  value  it  will  there  sell  for.  In  some1  countries,  highly- 
civilized  and  productive  in  the  extreme,  land  pays  no  more  than  3 
or  4  per  cent,  upon  its  price  or  purchase-money.  Yet,  this  is  no 
proof  of  the  poverty  of  the  soil ;  it  proves  only,  that  it  sells  dear.  A 
landed  estate  may  yield  24  dollars  the  acre,  and  require  very  little 
expense  of  cultivation;  as  if  it  be  laid  down  in  pasture,  for  instance;  in 
such  case  it  must  owe  most  of  its  value  to  its  natural  properties;  yet, 
;*'it  have  cost  the  proprietor  800  dollars  the  acre,  it  will  yield  a  return 
ot  3  per  cent.  only.  And  herein  consists  the  difference  between  the 
profit  and  the  rent  of  land :  profit  is  high  or  low,  according  to  the 


CHAP.  IX.  ON  DISTRIBUTION.  363 

quantum  of  the  product ;  rent,  according  to  the  quantum  of  the  pur 
chase-money  or  price.     An  acre  of  land,  yielding  a  profit  of  one 
dollar  only,  will  bring  as  high  a  rent  as  an  acre  yielding  a  profit  of  50 
dollars,  if  50  times  as  much  has  been  paid  for  the  one  as  for  the  other. 

Whenever  land  is  bought  with  capital,  or  capital  with  land,  occa- 
sion is  given  for  a  comparison  of  the  returns  of  the  one  species  of 
property  with  the  returns  of  the  other.  It  is  possible,  that  an  estate, 
bought  with  a  capital  of  100,000  dollars,  may  produce  but  3  or  4000 
dollars  per  annum,  whilst  the  same  amount  of  capital  would  yield  5 
or  6000  dollars.  The  lower  rate  of  interest,  which  the  proprietor  is 
content  to  take  on  a  purchase  of  land,  maybe  attributed,  in  the  first 
place,  to  the  superior  stability  of  the  investment.  Capital  can  seldom 
be  made  productive,  without  undergoing  several  changes  both  of 
form  and  of  place,  the  risk  of  which  is  always  more  or  less  alarming 
to  persons  unaccustomed  to  the  operations  of  industry ;  whereas,  on 
the  contrary,  landed  property  produces  without  any  change  of  either 
quality  or  position.  The  satisfaction  and  pleasure  attached  to  terri- 
torial possession,  the  consideration,  weight,  and  dignity  it  communi- 
cates, and  the  titles  and  privileges  with  which  it  is  in  some  countries 
accompanied,  contribute  greatly  to  increase  this  natural  preference. 

It  is  true,  that  land  is  more  exposed  than  other  property  to  the 
burden  of  public  taxation,  and  to  the  arbitrary  exactions  of  power, 
precisely  because  it  can  neither  be  removed  nor  concealed.  A  float- 
ing capital  may  take  any  shape  whatever,  and  be  removed  at  will. 
It  can  escape  tyranny  and  civil  commotions  more  readily,  than  even 
the  person  of  its  proprietor.  It  is  a  safer  object  of  property ;  for  it 
is  often  impossible  to  attach  it,  or  to  make  it  specifically  responsible 
for  the  debts  of  the  proprietor.  Moreover,  it  is  much  less  exposed 
to  litigation  than  landed  property.  Yet,  it  is  clear,  that  all  these 
advantages  are  more  than  counterpoised  by  the  superior  risk  of 
investment;  and,  that  landed  property  is  still  preferred  to  floating 
capital ;  since  land  is  dearer,  in  proportion  to  its  annual  returns. 

Whatever  may  be  the  exchangeable  price  of  land  and  capital  one 
to  the  other,  it  is  proper  to  observe,  that  their  interchange  makes 
no  variation  in  the  supply  of  productive  agency  of  land  and  capital 
respectively  in  circulation,  and  disposable  for  the  purpose  of  produc- 
tion ;  consequently,  that  exchangeable  price  can  nowise  affect  the 
real  and  positive  profit  of  land  and  of  capital.  When  Richard  sells 
his  estate  to  Thomas,  the  productive  service  of  the  land  is  at  the  dis- 
posal of  Thomas  instead  of  Richard;  and  that  of  the  capital,  given 
in  exchange  for  it,  is  at  the  disposal  of  Richard  instead  of  Thomas. 

The  only  thing,  which  really  varies  the  amount  of  productive 
agency  of  land  in  circulation,  is  the  actual  amelioration  of  the  soil, 
by  clearing  and  bringing  new  land  into  cultivation,  or  enlarging 
the  productive  power  of  old  land,  and  thus  increasing  its  product. 
Savings  and  accumulations  of  capital  are,  in  the  shape  of  agricul- 
tural improvements,  transformed  into  landed  property,  and  made  to 
participate  in  all  the  peculiar  advantages  and  disadvantages  attached 
to  it.  The  same  may  be  said  of  houses,  and  generally  of  all  Capita 


364  ON  DISTRIBUTION.  BOOK  II. 

invested  in  a  fixed  and  permanent  object ;  it  thenceforth  loses  the 
character  of  capital,  and  assumes  that  of  landed  property. 

Whence  we  may  draw  this  invariable  maxim  ;  that  the  productive 
agency  of  land  is  possessed  of  value,  which  value,  like  value  in  gene- 
ral, increases  in  the  direct  ratio  of  the  demand,  and  the  inverse  ratio 
of  the  supply;  and  that,  since  land  differs  as  much  in  quality,  as  in 
site  and  position,  there  is  a  peculiar  demand  and  supply  for  each 
peculiar  quality.  A  demand  for  so  much  wine,  more  or  less,  what- 
ever it  arise  from,  creates  a  specific  demand  for  as  much  productive 
agency  of  the  soil,  as  may  be  requisite  for  its  growth;*  and  the  extent 
of  surface,  adapted  to  the  culture  of  the  grape,  determines  the  supply 
of  that  productive  service.  If  the  soil,  capable  of  growing  good 
wine,  be  very  limited  in  extent,  and  the  demand  for  such  wine  very 
brisk,  the  profit  of  the  soil  itself  will  be  extravagantly  high. 

It  is  worthy  of  remark,  that  all  land,  that  yields  any  profit  at  all, 
however  trifling  the  amount,  even  so  little  as  20  cents  the  acre,  or 
even  less,  may  be  kept  in  a  state  of  cultivation :  and  there  have  been 
many  instances  of  its  cultivation  under  such  circumstances.  Herein 
it  differs  from  capital  and  industry.  A  labourer,  if  he  finds  himself 
settled  in  a  place,  where  his  labour  does  not  yield  him  what  he  has 
reason  to  expect,  can  migrate  to  another.  So,  likewise,  capital  quickly 
flows  from  a  channel,  that  affords  a  less,  to  one  that  affords  a  greater 
return.  But  land  has  not  the  same  facilities:  it  is  of  necessity  im- 
moveable ;  consequently,  out  of  its  gross  product,  after  the  deduction 
in  the  first  instance  of  all  advances  of  capital,  with  interest,  as  well 
as  of  the  profits  of  industry,  without  which  there  could  be  no  product 
whatever,  there  still  remains  to  be  deducted  the  expense  of  carrying 
the  product  to  the  market,  or  place  of  exchange.  When  these  seve- 
ral deductions  absorb  the  whole  product  of  the  land,  the  land  itself 
yields  no  profit  at  all,  and  the  proprietor  can  never  succeed  in 
getting  a  rent  from  it.  Even  if  he  cultivate  it  himself,  he  can  only 
gain  a  profit  on  his  capital  and  industry,  but  will  receive  none  what- 
ever from  the  bare  ownership  of  the  land.  In  Scotland,  there  are 
tracts  of  unproductive  land  thus  cultivated  by  the  proprietors,  which 
it  would  not  answer  for  any  one  else  to  undertake.  So,  likewise, 
in  the  back  settlements  of  the  United  States,  there  are  tracts  of  great 
extent  and  fertility,  whose  revenue  alone  would  not  maintain  the 
proprietors ;  yet  they  are,  nevertheless,  cultivated  with  success :  but 
it  is  by  the  proprietors  themselves,  who  consume  the  product  at  the 
place  of  growth,  and  are  obliged  to  superadd  to  the  profit  of  the  land, 
which  is  Iktle  or  nothing,  the  further  profit  of  capital  and  personal 
industry,  which  afford  a  handsome  competency. 

It  is  obvious,  that  land,  though  in  a  state  of  cultivation,  yields  no 
profit,  when  no  farmer  will  pay  rent  for  it,  which  is  a  convincing 
proof  that  it  gives  no  surplus,  after  allowing  for  the  profit  of  the 
capital  and  industry  requisite  for  its  cultivation. 

In  the  instance  just  mentioned,  the  effect  is  occasioned  by  the  dis- 

*  As  well  as  a  demand  for  the  capital  and  industry  requisite  for  the  cultivation. 


CHAP.  IX.  ON  DISTRIBUTION.  365 

tance  of  the  market;  the  expense  of  transport  swallows  up  the  profit, 
which  might  otherwise  be  made  of  the  land.  Other  instances  might 
be  adduced,  in  which  badness  of  seasons,  war,  or  taxation,  have  pro- 
duced the  same  effect,  and  partially  or  totally  absorbed  the  profit  of 
land,  and  thus  thrown  it  out  of  cultivation.* 


SECTION  IL 

Of  Rent. 

When  a  farmer  takes  a  lease  of  land,  he  pays  to  the  proprietor  the 
profit  accruing  from  its  productive  agency,  and  reserves  to  himself, 
besides  the  wages  of  his  own  industry  the  profit  upon  the  capital  he 
embarks  in  the  concern ;  which  capital  consists  in  implements  of 
husbandry,  carts,  cattle,  &c.  He  is  an  adventurer  in  the  business  of 
agricultural  industry;  and,  amongst  the  means  he  has  to  work  with, 
there  is  one  that  does  not  belong  to  him,  and  for  which  he  pays  rent, 
i.  e.  the  land. 

The  preceding  section  was  occupied  in  explaining  the  source  of 
the  profit  of  land.  Its  rent  is  generally  fixed  at  the  highest  rate  of 
that  profit,  and  for  the  following  reason. 

Agricultural  adventure  requires,  on  the  average,  a  smaller  capi- 
tal,(a)  in  proportion,  than  other  classes  of  industry,  reckoning  the 
land  itself  as  no  part  of  the  capital  of  the  adventurer.  Wherefore, 
there  is  a  greater  number  of  persons  able,  from  their  pecuniary  cir- 
cumstances, to  embark  in  agricultural,  than  in  any  other  speculations; 
consequently,  a  greater  competition  of  bidders  for  land  upon  lease- 
On  the  other  hand,  the  quantity  of  land  fit  for  cultivation  is  limited 
in  all  countries ;  whereas  the  quantity  of  capital  and  the  number 
of  cultivators  have  no  assignable  limitation.  Landed  proprietors, 
therefore,  at  least  in  those  countries  which  have  been  long  peopled 
and  cultivated,  are  enabled  to  enforce  a  kind  of  monopoly  against 
the  farmers.  The  demand  for  their  commodity,  land,  may  go  on 
continually  increasing;  but  the  quantity  of  it  can  never  be  extended. 

This  circumstance  is  equally  applicable  to  the  nation  at  large, 
and  to  each  particular  province  or  district.  The  number  of  acres 
to  be  rented  in  each  province  is  incapable  of  extension ;  whilst  the 

*  This  catalogue  of  adverse  circumstances,  all  bearing  more  strongly  upon 
the  profit  of  land,  than  upon  that  of  other  sources  of  revenue,  explains  the  fre- 
quent and  unavoidable  remission  of  rent  to  the  farmer,  and  proves  the  accuracy 
of  M.  de  Sevigne's  judgment,  when  she  writes  from  the  country: — "I  wish  my 
son  could  come  here  and  convince  himself  of  the  fallacy  of  fancying  oneself 
possessed  of  wealth,  when  one  is  only  possessed  of  land."  Lettre  224. 

(a)  This  is  not  universally  true.     In  England,  where  agriculture  has  attained 
a  high  degree  of  perfection,  arable  farms  require  much  larger  capitals  than  for- 
merly ;  and  a  farmer  is  commonly  a  much  richer  man,  than  the  majority  of  tins 
tradesmen  in  his  neighbourhood.     T. 
31* 


360  ON  DISTRIBUTION.  BOOK  II. 

number  of  persons  in  a  condition  to  rent  them  has  no  fixed  and 
absolute  limit. 

Whenever  this  is  the  case,  the  bargain  between  the  land-holder 
and  the  tenant  must  always  be  greatly  in  favour  of  the  former ;  and, 
•whenever  there  is  any  portion  of  the  soil,  which  yields  to  the  latter 
move  than  the  interest  of  his  capital  and  the  wages  of  his  industry, 
a  higher  bidder  will  soon  offer  himself.  The  liberality  of  a  few  pro- 
prietors, the  distance  at  which  they  happen  to  reside,  the  ignorance 
of  others,  and  even  of  the  farmers  themselves,  and  the  imprudence 
of  a  few  more,  may  sometimes  operate  to  depress  the  ratio  of  rent 
below  the  maximum  of  profit;  but  these  are  accidental  circum- 
stances, which  act  for  a  season  only,  and  can  never  prevent  the 
regular  and  constant  action  of  natural  causes,  which  must  in  the 
end  prevail. 

Besides  this  advantage  accruing  to  the  land-holder,  derived  from 
the  very  nature  of  things,  he  has  likewise  in  general  the  advantage 
of  possessing,  or  being  able  to  accumulate  greater  wealth,  and  some- 
times credit,  patronage  and  influence,  into  the  bargain :  but  the  first 
advantage  is  alone  sufficient  to  insure  him  the  sole  benefit  of  any 
circumstances,  that  may  happen  to  enhance  the  profit  of  land.  The 
opening  of  a  canal  or  road,  the  increase  of  population,  wealth,  and 
affluence  in  the  province,  always  operate  to  raise  his  rent.  He  also 
benefits  by  every  improvement  in  the  cultivation;  for  a  man  can 
afford  to  pay  dearer  for  the  hire  of  an  instrument,  when  he  knows 
how  to  turn  it  to  better  account. 

When  the  proprietor  himself  expends  a  capital  in  the  improvement 
of  his  land,  in  draining,  irrigation,  fences,  buildings,  houses,  or  other 
erections,  the  rent  then  includes,  in  addition  to  the  profit  of  the  land, 
the  interest  likewise  of  the  capital  so  expended.* 

The  farmer  may  sometimes  undertake  these  expenses  of  ame- 
lioration himself;  but  he  can  only  calculate  on  receiving  interest 
on  the  outlay  during  the  continuance  of  his  lease:  at  the  expira- 
tion of  which,  the  benefit  must  devolve  to  the  land-holder,  being 
wholly  incapable  of  removal :  thenceforward  the  landlord  derives 
the  whole  profit,  without  having  made  any  of  the  advances :  for 
he  receives  a  pi-oportionate  increase  of  rent  in  consequence.  The 
farmer  should,  therefore,  engage  only  in  those  improvements,  whose 
effects  will  last  no  longer  than  his  lease ;  unless  the  lease  be  long 
enough,  to  allow  the  profit  arising  from  his  improvements  to  repay 
the  whole  outlay,  together  with  the  interest.  It  is  in  this  way, 
that  long  leases  operate  to  increase  the  product  of  the  land;  ind  it 
is  evident  the  effect  will  be  the  greatest,  when  the  land  is  farmed 
by  the  proprietor  himself;  for  he  is  far  less  likely,  than  the  farmer, 
to  lose  the  benefit  of  such  advances ;  every  judicious  improvement 
Yields  him  a  permanent  profit,  and  the  original  outlay  is  amply 
repaid,  when  the  land  is  finally  disposed  of.  The  farmer's  certainty 

*  The  capital,  vested  in  improvements  upon  land,  is  sometimes  of  greater 
ralue  than  the  land  itself.  This  is  the  case  with  dwelling-houses 


CHAP.  IX.  ON  DISTRIBUTION.  367 

of  reaping  the  advantage  till  the  end  of  his  lease,  is  equally  conducive 
to  the  improvement  of  landed  property  with  the  length  of  leases. 
On  the  contrary,  such  laws  and  customs,  as  authorize  the  cancelling 
of  leases  in  specified  cases,  as  in  case  of  sale  by  the  proprietor,  are 
highly  prejudicial  to  agriculture ;  since  Vhe  farmer  will  hardly  ven- 
ture to  undertake  any  considerable  improvement,  if  kept  in  continual 
fear  of  seeing  an  intrusive  successor  appropriate  the  recompense  of 
his  ingenuity,  labour,  and  capital.  In  tact,  every  improvement  he 
should  make  would  but  increase  the  risk  of  that  injustice ;  for  land 
is  far  more  saleable  in  good  condition  than  otherwise. 

Leases  are  nowhere  more  sacredly  regarded  than  in  England ; 
and  the  privilege,  enjoyed  by  leasees  to  the  amount  of  40s.  (about 
10  dollars)  and  upwards,  of  voting  at  Parliamentary  elections,  has, 
in  some  measure,  restored  the  equipoise  of  power  and  influence 
between  landlords  and  tenants,  which  seldom  exists  in  practice.  In  no 
other  country  do  we  see  tenants  so  confident  of  undisturbed  posses- 
sion, as  to  build  upon  ground  held  on  lease.  Such  tenants  improve 
the  land,  as  if  it  were  their  own ;  and  their  landlords  are  punctually 
paid;  which  is  less  frequently  the  case  elsewhere. 

The  land  is  sometimes  cultivated  by  persons  possessed  of  no  capi- 
tal whatever:  the  proprietor  furnishes  himself  the  requisite  capital,  as 
well  as  the  land.  They  are  called  in  France,  metayers,  and  com- 
monly pay  to  the  landlord  half  the  gross  product.  This  arrangement 
is  to  be  met  with  only  in  the  infancy  of  agriculture,  and  is  of  all 
others  the  least  conducive  to  improvement ;  for  the  party  who  bears 
the  expense  of  amelioration,  whether  landlord  or  tenant,  makes  the 
other  a  gratuitous  present  of  half  the  interest  on  his  advances.  This 
kind  of  tendency  was  more  common  in  the  feudal  times,  than  it  is 
at  present.  The  lords  were  above  tilling  the  land  themselves,  and 
their  vassals  had  not  the  means.  The  largest  incomes  were  then 
derived  from  the  land,  because  the  lords  were  large  proprietors;  but 
they  bore  no  proportion  to  the  extent  of  the  land.  Nor  was  this 
owing  to  the  defect  of  agricultural  skill,  so  much  as  to  the  scarcity 
of  capital  devoted  to  improvements.  The  lord  felt  little  anxiety  to 
improve  his  property,  and  expended,  in  a  way  more  liberal  than 
productive,  an  income  that  he  might  easily  have  tripled.  He  levied 
war,  gave  feasts  and  tournaments,  and  maintained  a  numerous 
retinue.  If  we  look  at  the  then  degraded  condition  of  commerce 
and  manufacture,  superadded  to  the  insecurity  of  the  agricultural 
interest,  we  need  go  no  further  for  the  explanation  of  the  reason, 
why  the  bulk  of  the  community  was  in  the  extreme  of  indigence ; 
and  why,  independently  of  every  political  cause,  the  nation  itself 
was  weak  and  impotent.  Five  departments  would  now  be  able  to 
repel  attacks,  which  overwhelmed  all  France  at  that  period :  t>u' 
happily  for  her,  the  other  states  of  Europe  were  nowise  in  a  bette- 
condition. 


368  ON  DISTRIBUTION.  BOOK  II 

CHAPTER  X. 

OF  THE  EFFECT  OF  REVENUE  DERIVED  BY  ONE  NATION  FROM  ANOTHER. 

O.VE  nation  cannot  take  from  another  the  revenues  of  its  industry. 
A  German  tailor,  establishing  himself  in  France,  there  makes  a 
profit,  in  which  Germany  had  no  participation.  But,  if  this  tailor 
contrive  to  amass  a  little  capital,  and  after  the  lapse  of  several  years 
carry  it  back  with  him  to  his  native  country,  he  injures  France  to 
the  same  extent  as  a  French  capitalist,  who  should  emigrate  with 
.the  same  amount  of  fortune.*  In  a  political  view,  the  injury  to  the 
wealth  of  the  nation  is  equal  in  both  cases ;  but  in  a  moral  light,  it  is 
otherwise;  for  I  reckon  that  a  native  Frenchman  in  quitting  his 
country,  robs  it  of  an  affectionate  attachment,  and  a  spirit  of  exclu- 
sive nationality,  which  it  can  never  look  for  in  a  stranger  born. 

A  nation,  receiving  a  stray  child  into  its  bosom  again,  acquires  a 
real  treasure;  inasmuch  as  in  him  it  receives  an  addition  to  its  popu- 
lation, an  accession  to  the  profits  of  national  industry,  and  an  acqui- 
sition of  capital.  It  at  the  same  time  recovers  a  lost  citizen,  and  the 
means  for  him  to  subsist  upon.  If  the  exile  bring  back  his  industry 
only,  at  any  rate  the  profits  of  industry  are  added  to  the  national 
stock.  It  is  true,  that  a  source  of  consumption  is  likewise  super- 
added  ;  but  supposing  it  to  counterbalance  the  advantage,  there  is  no 
diminution  of  revenue,  while  the  moral  and  political  strength  of  the 
country  is  actually  augmented,  (a) 

With  regard  to  the  capital  lent  by  one  nation  to  another,  the  effect 
upon  their  respective  wealth  is  precisely  analogous  to  that,  resulting 
from  every  loan  from  one  individual  to  another.  If  France  borrow 
capital  from  Holland,  and  devote  it  to  a  productive  purpose,  she  will 
gain  the  profit  of  industry  and  land  accruing  from  the  employment 
of  that  capital ;  and  she  will  do  so  even  though  she  pay  interest ; 
in  like  manner  as  a  merchant  or  manufacturer  borrows  for  the  pur- 

*  If,  however,  this  capital  be  the'fruit  of  his  personal  frugality,  he  robs  France 
of  no  part  of  her  wealth  existing  previous  to  his  arrival.  Had  he  continued 
resident  there,  the  aggregate  of  the  capital  of  France  would  have  been  increased 
to  the  full  extent  of  his*  accumulation;  but,  in  taking  the  whole  away  with  him, 
he  takes  no  more  than  his  own  earnings,  and  no  value  but  what  is  of  his  own 
creation,  in  so  doing,  he  commits  no  individual,  and,  therefore,  no  national 
wrong. 

(a)  In  the  common  course  of  things,  such  an  addition  is  a  national  benefit, 
because  it  is  an  accession  to  the  secondary  source  of  production,  i.  e.  industry. 
But.  defective  human  institutions  may  convert  a  benefit  into  a  curse;  as  where  a 
poor-law  system  gives  gratuitous  subsistence  to  a  part  of  the  population,  capable 
of  labour,  but  not  incited  by  want.  In  such  case,  every  additional  human  being 
may  be  a  burthen  instead  of  a  prize;  for  he  may  be  one  more  on  the  list  of  idle 
(pensioners.  T 


CHAP.  X.  ON  DISTRIBUTION.  369 

poses  of  his  concern,  arid  gains  a  residue  of  profit,  even  aftei  paying 
the  interest  of  the  loan. 

But,  if  one  state  borrow  from  another,  not  for  productive  pur- 
poses, but  for  those  of  mere  expenditure,  the  capital  borrowed  will 
then  yield  no  return,  and  the  national  revenue  be  saddled  with  the 
interest  to  the  foreign  creditor.  Such  was  the  condition  of  France, 
when  she  borrowed  from  the  Genoese,  the  Dutch,  and  the  Genevese, 
for  the  support  of  her  wars,  or  to  feed  the  prodigality  of  a  court. 
Yet  it  was  better  to  borrow  from  strangers  than  from  natives,  even 
for  the  purpose  of  dissipation ;  because,  the  amount  so  borrowed  was 
not  withdrawn  from  the  national  productive  capital  of  France.  In 
either  case,  the  French  people  wpuld  have  to  pay  the  interest;*  but 
had  they  likewise  lent  the  capital,  they  would  have  had  to  pay  the 
interest,  and  at  the  same  time  have  lost  the  benefit,  which  their 
industry  and  land  might  have  derived  from  its  employment  and 
agency. 

With  regard  to  such  landed  property,  as  may  belong  to  foreigners 
residing  abroad,  the  revenue  arising  from  it  is  an  item  of  foreign, 
and  forms  no  part  of  the  national  revenue.  But  it  is  to  be  remem- 
bered, that  the  foreigner  cannot  have  purchased  it  without  a  remit- 
tance of  capital  equal  in  value  to  the  land;  which  capital  is  an  equally 
valuable  acquisition,  particularly  if  the  nation  be  possessed  of  im- 
proveable  land  in  abundance,  but  of  little  capital  to  set  industry  in 
motion.  'In  making  his  purchase  of  land,  the  foreigner  exchanges  a 
revenue  of  capital,  which  he  leaves  the  nation  to  profit  by,  for  a 
revenue  of  land ;  which  he  thenceforth  receives :  thus  bartering  in- 
terest of  money  for  rent  of  land.  If  the  national  industry  be  active 
and  skilfully  directed,  more  benefit  may  be  derived  from  the  interest, 
than  was  before  obtained  from  the  rent;  the  purchaser,  however, 
acquires  a  fixed  and  permanent  property,  in  lieu  of  one  more  perish- 
able, transferable,  and  destructible.  Mismanagement  may  soon 
annihilate  the  capital  the  nation  has  acquired ;  but  the  land  remains 
a  permanent  possession  of  the  purchaser,  and  he  may  sell  it  and  get 
back  the  value  when  he  pleases.  There  is  therefore  nothing  to  be 
apprehended  from  the  purchase  of  land  by  foreigners,  provided  there 
be  wisdom  enough,  to  employ  in  reproduction  the  value  received  in 
exchange. 

The  particular  form,  in  which  one  nation  may  draw  revenue  from 
another,  is  of  no  importance  whatever.  It  may  be  remitted  in  specie, 
in  bullion,  or  in  any  other  kind  of  merchandise:  indeed  it  is  of  the 
greatest  consequence  to  leave  individuals  to  take  it  in  the  shape  that 
best  suits  their  convenience;  for  what  suits  them  will  infallibly  be 
the  best  for  both  nations;  in  like  manner  as  in  the  conduct  of  inter- 
national trade,  the  commodity,  which  individuals  export  or  import 
in  preference,  is  that  which  best  suits  the  mutual  national  interests. 

The  agents  of  the  English  East  India  Company  drew  from  that 

*  It  will  be  shown  in  Book  III.  that  the  interest  is  equally  lost,  whether 
spent  internally  or  external h*, 

2W 


370  ON  DISTRIBUTION.  BOOK  II 

country,  either  an  annual  revenue,  or  an  accumulated  fortune,  which 
they  returned  to  England  to  enjoy  and  live  upon :  they  took  good 
care  not  to  withdraw  these  remittances  in  the  shape  of  gold  or 
silver,  because  the  precious  metals  were  of  more  relative  value  in 
Asia  than  in  Europe ;  they  remitted  in  the  shape  of  India  goods 
and  products,  on  which  a  fresh  piofit  was  made  on  arrival  in  Eu- 
rope: every  million  they  remitted,  swelled,  perhaps,  to  so  much  as 
1,200,000,  by  the  time  it  reached  the  place  of  destination.  Thus, 
Europe  gained  to  the  amount  of  1,200,000,  while  India  lost  only  a 
million.  If  these  despoilers  of  India*(a)  insisted  on  transmitting 
this  whole  sum  in  specie,  they  must  have  robbed  Hindostan,  perhaps, 
of  1,500,000,  or  upwards,  for  every  1,200,000  that  England  received. 
The  same  sum  may,  perhaps,  have  been  amassed  originally  in  specie; 
but  it  was  always  remitted  in  the  shape  of  that  commodity,  which, 
for  the  time  being,  answered  best  as  an  object  of  transport.  As  long 
as  exportation  of  any  kind  is  allowed,  and  exportation  has  always 
been  regarded  by  statesmen  with  a  favourable  eye,  it  is  easy  to 
receive  in  one  country,  the  revenue  and  capital  derived  from  another 
And  the  remittance  cannot  be  prevented  by  the  government,  without 
the  interdiction  of  all  external  commerce,  which,  after  all,  would 
leave  the  resource  of  smuggling  and  contraband.  In  the  eyes  of 
political  economy,  nothing  is  more  absurd,  than  to  see  governments 
prohibit  the  export  of  the  national  specie,  as  a  means  of  checking 
the  emigration  of  wealth.f 

*Raynal  tells  us,  that,  inasmuch  as  the  East  India  Company  derived  a  revenue 
from  Bengal,  to  be  consumed  in  Europe,  it  must  infallibly' drain  it  of  specie  in 
the  end,  since  the  company  is  the  only  merchant,  and  imports  no  specie  itself. 
But  Raynal  is  mistaken  in  this.  In  the  first  place,  private  merchants  do  carry 
the  precious  metals  to  India,  because  they  are  of  more  value  there  than  in 
Europe ;  and  that  very  reason  also  deters  the  servants  of  the  company,  who  may 
have  made  fortunes  in  Asia,  from  remitting  them  in  specie. 

And  if  it  were  to  be  suggested,  that  a  fortune,  remitted  to  Europe,  is  less  sub- 
stantial and  more  speedily  dissipated,  when  it  arrives  in  the  shape  of  goods,  than 
when  in  that  of  specie,  this  again  would  be  an  error.  The  form,  that  property 
happens  to  assume,  does  not  affect  its  substantiality ;  when  once  transferred  to 
Europe,  it  may  be  converted  into  specie,  or  land,  or  what  not.  It  is  the  amount 
of  values,  and  not  the  temporary  form  they  appear  under,  which,  in  this  colonial 
connexion,  as  in  that  of  international  trade,  is  the  essential  circumstance. 

•fThe  complete  interception  of  all  export  of  objects  of  value  would  not  help 
them  towards  the  point  of  intent ;  because  free  communication  occasions  a  much 
greater  influx  than  efflux  of  wealth.  Value,  or  wealth,  is  by  nature  fugitive 
and  independent.  Incapable  of  all  restraint,  it  is  sure  to  vanish  from  the  fetters 
that  are  contrived  to  confine  it,  and  to  expand  and  flourish  under  the  influence 
of  liberty. 

(a)  This  is  a  harsh  word,  yet  probably  justified  by  the  history  of  the  original 
acquisition.  But  the  scene  has  now  changed ;  the  servants  of  the  sovereign 
company  no  longer  look  to  spoliation  as  a  public  or  private  resource,  but  are 
content  with  the  liberal  remuneration  of  laborious  duties,  civil,  military,  and 
financial.  A  slight  examination  of-  the  connexion  between  Britain  and  her 
Asiatic  dependencies  will  show,  how  small  a  balance  is  remitted  to  the  former 
in  any  shape ;  and  it  should  be  remembered  that  part,  even  of  this,  is  but  the 
interest  of  loans  raised  in  England,  for  the  purposes  of  Indian  administration, 
Uiough  not  always  of  a  wise  or  paternal  character.  T. 


CHAP.  XL  ON  DISTRIBUTION. 


CHAPTER  XL 

OP  THE  MODE  IN  WHICH  THE  ClUANTITY  OF  THE  PRODUCT  AFFECTS 
POPULATION. 


SECTION  I. 

Of  Population,  as  connected  with  Political  Economy. 

HAVING,  in  Book  I,  investigated  the  production  of  the  articles 
necessary  to  the  satisfaction  of  human  wants,  and  in  the  present 
Book,  traced  their  distribution  among  the  different  members  of  the 
community,  let  us  now  further  extend  our  observations  to  the  in- 
fluence those  products  exercise  upon  the  number  of  individuals,  of 
which  the  community  is  composed ;  that  is  to  say,  upon  population. 

In  her  treatment  of  all  organic  bodies,  nature  seems  to  neglect  the 
individual,  and  afford  protection  only  to  the  species.  Natural  history 
presents  very  curious  examples  of  her  extraordinary  care  to  per- 
petuate the  species ;  but  the  most  powerful  means  she  adopts  for 
that  purpose,  is  the  multiplication  of  germs  in  such  vast  profusion, 
that  notwithstanding  the  immense  variety  of  accidents  occurring  to 
prevent  their  early  development,  or  destroy  them  in  the  progress  to 
maturity,  there  are  always  left  more  than  sufficient  to  perpetuate 
the  species.  Did  not  accident,  destruction,  or  failure  of  the  means 
of  development,  check  the  multiplication  of  organic  existence,  there 
is  no  animal  or  plant  that  might  not  cover  the  face  of  the  globe  in  a 
very  few  years. 

This  faculty  of  infinite  increase  is  common  to  man,  with  all  other 
organic  bodies ;  and  although  his  superior  intelligence  continually 
enlarges  his  own  means  of  existence,  he  must  sooner  or  later  arrive 
at  the  ultimum. 

Animal  existence  depends  upon  the  gratification  of  one  sole  and 
immediate  want,  that  of  food  and  sustenance ;  but  man  is  enabled,  by 
the  faculty  of  communication  with  his  species,  to  barter  one  product 
for  another,  and  to  regard  the  value,  rather  than  the  nature,  of  the 
product  The  producer  and  owner  of  a  piece  of  furniture  of  twenty 
dollars  value,  may  consider  himself  as  possessing  as  much  human 
food,  as  may  be  procurable  for  that  price.  And  with  respect  to  the 
relative  price  of  products,  it  is  in  all  cases  determined  by  the  inten- 
sity of  the  desire,  the  degree  of  utility  in  each  product  for  the  time 
beinor.  We  may  safely  take  it  for  granted,  that  mankind  in  general 
will  not  barter  an  object  of  more,  for  one  of  less  urgent  necessity 
In  a  season  of  agricultural  scarcity,  a  larger  quantity  of  furniture 
will  be  given  for  a  smaller  quantity  of  human  aliment;  but  it  is  in- 
variably true,  that  whenever  barter  takes  place,  the  object  given  on 


372  ON  DISTRIBUTION.  BOOK  JL 

one  side  is  worth  that  given  on  the  other,  and  that  the  one  is  pro- 
curable for  the  other.* 

Trade  and  barter,  as  we  have  seen  above,  adapt  the  products  to 
the  general  nature  of  the  demand.  The  objects,  whether  of  food 
or  raiment,  or  of  habitation,  for  which  the  strongest  desire  is  felt, 
are  of  course  the  most  in  request ;  and  the  wants  of  each  family  or 
individual,  are  more  or  less  fully  satisfied,  in  proportion  to  the  ability 
to  purchase  these  objects;  which  ability  depends  upon  the  produc- 
tive means  and  exertion  of  each  respectively;  in  plain  terms,  upon 
the  revenue  of  each  respectively.  Thus,  in  the  end,  if  we  sift  this 
matter  to  the  bottom,  we  shall  find,  that  families, and  nations,  which 
are  but  aggregations  of  families,  subsist  wholly  on  their  own  pro- 
ducts; and  that  the  amount  of  product  in  each  case  necessarily 
limits  the  numbers  of  those  who  can  subsist  upon  it. 

Such  animals  as  are  incapable  of  providing  for  future  exigencies, 
after  they  are  engendered,  if  they  do  not  fall  a  prey  to  man,  or  some 
of  their  fellow  brutes,  perish  the  moment  they  experience  an  im- 
perative want,  which  they  have  not  the  means  of  gratifying.  But 
man  has  so  many  future  wants  to  provide  for,  that  he  could  not 
answer  the  end  of  his  creation,  without  a  certain  degree  of  provi- 
dence and  forethought;  and  this  provident  turn  can  alone  preserve 
the  human  species  from  part  of  the  evils  it  would  necessarily  endure, 
if  its  numbers  were  to  be  perpetually  reduced  by  the  process  of 
destructive  violence.f 

Yet  notwithstanding  the  forethought  ascribed  to  man,  and  the 
restraints  imposed  on  him  by  reason,  legislation,  and  social  habits, 
the  increase  of  population  is  always  evidently  co-extensive,  and  even 
something  more  than  co-extensive,  with  the  means  of  subsistence. 
It  is  a  melancholy  but  an  undoubted  fact,  that,  even  in  the  most 

*  Although  all  products  are  necessary  to  the  social  existence  of  man,  the  ne- 
cessity of  food  being  of  all  others  most  urgent  and  unceasing,  and  of  most  fre- 
quent recurrence,  objects  of  aliment  are  justly  placed  first  in  the  catalogue  of 
the  means  of  human  existence.  They  are  not  all,  however,  the  produce  of  the 
national  territorial  surface ;  but  are  procurable  by  commerce  as  well  as  by  inter- 
nal agriculture ;  and  many  countries  contain  a  greater  number  of  inhabitants  than 
could  subsist  upon  the  produce  of  their  land.  Nay,  the  importation  of  another 
commodity  may  be  equivalent  to  an  importation  of  an  article  of  food.  The  export 
of  wines  and  brandies  to  the  north  of  Europe  is  almost  equivalent  to  an  export 
of  bread ;  for  wine  and  brandy,  in  great  measure,  supply  the  place  of  beer  and 
spirits  distilled  from  grain,  and  thus  allow  the  grain,  which  would  otherwise  be 
employed  in  the  preparation  of  beer  or  spirits,  to  be  reserved  for  that  of  bread. 

fThe  practice  of  infanticide  in  China  proves,  that  the  local  prejudices  of  cus- 
tom and  of  religion  there  counteract  the  foresight  which  tends  to  check  the  in- 
crease of  population ;  and  one  can  not  but  deplore  such  prejudices ;  for  the  human 
misery  resulting  from  the  destruction  is  great,  in  proportion  as  its  object  is  more 
fully  developed,  and  more  capable  of  sensation.  For  this  reason  it  would  be  still 
more  barbarous  and  irrational  policy  to  multiply  wars,  and  other  means  of  human 
destruction,  in  order  to  increase  the  enjoyments  of  the  survivors;  because  the 
destructive  scourge  would  affect  human  beings  in  a  state  more  perfect,  more  sus- 
ceptible of  feeling  and  suffering,  and  arrived  at  a  period  of  life  when  the  mature 
tlteplav  of  his  faculties  renders  man  more  valuable  to  himself  and  to  others. 


CHAP.  XI.  ON  DISTRIBUTION.  373 

thriving  countries,  part  of  the  population  annually  dies  of  mere  want. 
Not  that  all  who  perish  from  want  absolutely  die  of  hunger;  though 
this  calamity  is  of  more  frequent  occurrence  than  is  generally  sup- 
posed.* I  mean  only  that  they  have  not  at  command  all  the  neces- 
saries of  life,,  and  die  for  want  of  some  part  of  those  articles  of 
necessity.  A  sick  or  disabled  person  may,  perhaps,  require  nothing 
more  than  a  little  rest,  or  medical  advice,  together  with,  perhaps, 
some  simple  remedy,  to  set  him  up  again ;  but  the  requisite  rest,  or 
advice,  or  remedy,  is  denied,  or  not  afforded.  A  child  may  require 
the  attentions  of  the  mother,  but  the  mother  may  perhaps  be  taken 
away  to  labour,  by  the  imperious  calls  of  necessity ;  and  the  child 
perish  through  accident,  neglect,  or  disease.  It  is  a  fact  vyell  esta- 
blished by  the  researches  of  all  who  have  turned  their  attention  to 
statistics,  that  out  of  an  equal  number  of  children  of  wealthy  and  of 
indigent  parents,  at  least  twice  as  many  of  the  latter  die  in  infancy 
as  of  the  former.  In  short,  scanty  or  unwholesome  diet,  the  insuffi- 
cient change  of  linen,  the  want  of  warm  and  dry  clothing,  or  of 
fuel,  ruin  the  health,  undermine  the  constitution,  and  sooner  or  later 
bring  multitudes  of  human  beings  to  an  untimely  end ;  and  all,  that 
perish  in  consequence  of  want  beyond  their  means  to  supply,  may 
be  said  to  die  of  want 

Thus,  to  man,  particularly  in  a  forward  state  of  civilization,  a 
variety  of  products,  some  of  them  in  the  class  of  what  have  been 
denominated  immaterial  products,  are  necessaries  of  existence;  these 
are  multiplied  in  a  degree  proportionate  to  the  desire  for  them, 
respectively,  because  its  intensity  causes  a  proportionate  elevation 

*  The  Hospice  de  Bicetre,  near  Paris,  contains,  on  the  average,  five  or  six 
thousand  poor.  In  the  scarcity  of  the  year  1795,  the  governors  could  not  afford 
them  food,  either  so  good  or  so  abundant  as  usual ;  and  I  am  assured  by  the  house- 
steward  of  the  establishment,  that  at  that  period  almost  all  the  inmates  died. 

It  would  appear  from  the  returns  given  in  a  tract  entitled  "  Observations  on 
the  Condition  of  the  Labouring-  Classes"  by  J.  Barton,  that  the  average  of 
deaths,  in  seven  distinct  manufacturing  districts  of  England,  has  been  projw- 
tionate  to  the  dearness,  or,  in  other  words,  to  the  scarcity  of  subsistence.  I 
subjoin  an  extract  from  his  statements. 

Average  price  of  Wheat 

Years.  per  qr.  Deaths, 

s.      d. 

1801    118    3 55,965 

1804 60    1  44,794 

1807 73    3 48,108 

1810 106    2 54,864 

From  tne  same  returns  it  appears,  that  the  scarcity  occasioned  less  mortality 
hi  the  agricultural  districts.  The  reason  is  manifest:  the  labourer  is  there  more 
commonly  paid  in  kind,  and  the  high  sale-price  of  the  product  enabled  the 
farmer  to  give  a  high  purchase-price  for  labour,  (a) 

(a)  The  latter  reason  is  not  very  satisfactory ;  for  the  total  receipts  of  :ne . 
corn-growers  are  probably  not  larger  in  years  of  scarcity,  than  in  those  cC 
abundance. '  T. 
32 


374  ON  DISTRIBUTION.  BOOK  D. 

of  their  price:  and  it  may  be  laid  down  as  a  genera]  maxim,  that 
the  population  of  a  state  is  always  proportionate  to  the  sum  of  its 
production  in  every  kind.*  This  is  a  truth  acknowledged  by  most 
writers  on  political  economy,  however  various  and  discordant  their 
opinions  on  most  other  points.f  (1) 

It  appears  to  me,  however,  that  one  very  natural  consequence, 
deducible  from  this  maxim,  has  escaped  their  observation ;  which  is, 
that  nothing  can  permanently  increase  population,  except  the  encou- 
ragement and  advance  of  production ;  and  that  nothing  can  occa- 
sion its  permanent  diminution,  but  such  circumstances  as  attack 
production  in  its  sources. 

The  Romans  were  forever  making  regulations  to  repair  the  loss 
of  population,  occasioned  by  their  state  of  perpetual  external  warfare. 
Their  censors  preached  up  matrimony ;  their  laws  offered  premiums 

*Not  but  that  accidental  causes  may  sometimes  qualify  these  general  rules. 
A  country,  where  property  is  very  unequally  distributed,  and  where  a  few  indi- 
viduals consume  produce  enough  for  the  maintenance  of  numbers,  will  doubtless 
subsist  a  smaller  population,  than  a  country  of  equal  production,  where  wealth 
is  more  equally  diffused.  The  very  opulent  are  notoriously  averse  to  the  burthen 
of  a  family ;  and  the  very  indigent  are  unable  to  rear  one.  . 

f  Vide  Stewart,  On  Political  Economy,  book  i.  c.  4.  Quesnay  Encyclopedic, 
art.  Grains.  Montesquieu,  Esprit  des  Lois,  liv.  18.  c.  10.  and  liv.  23.  c.  10. 
Bujfon,  ed.  de  Bernard,  torn.  iv.  p.  266.  Forbonnais,  Principes  et  Observa- 
tions, p.  39,  45.  Hume,  Essays,  part  2.  Ess.  2.  CEuvres  de  Poivre,  p.  145, 
146.  Condillac,  Le  Commerce  et  le  Gouvernement,  part  1.  chap.  24, 25.  Verri, 
Reflexions  sur  V  Economic  Politique,  c.  210.  Mirabeau,  Ami  des  Hommes,  torn, 
i.  p.  40.  Raynal,  Histoire  de  V ' Etablissement,  liv.  21.  s.  23.  Chastellux,  de  la 
Felicite  Publique,  torn.  ii.  p.  205.  Necker,  Administration  des  Finances  de 
France,  c.  9.  and  Notes  sur  VEloge  de  Colbert.  Condorcet,  Notes  sur  Voltaire, 
ed.  de  Kepi.  torn.  xlv.  p.  60.  Smith,  Wealth  of  Nations,  book  i.  c.  8, 11.  Gar- 
nier,  Abrege  Elementaire,  part  1.  c.  3.  and  Preface  de  sa  Traduction  de  Smith. 
Canard,  Principes  a" Economic  Politique,  p.  133.  Godwin,  On  Political  Jus- 
tice, book  viii.  c.  3.  Claviere,  De  la  France  et  des  Etats  Unis,  ed.  2.  p.  60, 
315.  Brown-Duignan,  Essay  on  the  Principles  of  National  Economy,  p.  97. 
Lond.  1776.  Beccaria,  Elemenli  di  Economia  Publica,  par.  prim.  c.  2,  3. 
Gorani,  Recherches  sur  la  Science  du  Gouvernement,  torn.  ii.  c.  7.  Sismondi, 
Nouv.  Prin.  d'Econ.  Pol.  liv.  vii.  c.  1.  et  seq.  Vide  also,  more  especially,  Mai- 
thus,  Essay  on  Population,  a  work  of  considerable  research ;  the  sound  and 
powerful  arguments  of  which  would  put  this  matter  beyond  dispute,  if  it  indeed 
had  been  doubted. 

(1)  The  simple  laws  of  population,  or  their  general  principles,  which  are  few 
and  plain,  are  examined,  discussed,  and  established  with  great  ability  by  Pro- 
fessor Senior,  of  Oxford,  as  well  in  the  two  lectures  on  Population  we  have 
already  referred  to,  as  in  his  subsequent  correspondence  with  Mr.  Malthus,  to 
which  these  lectures  gave  rise,  and  which  Mr.  Senior  has  subjoined  to  them,  in 
an  appendix.  Full  justice  is  done,  by  Mr.  Senior,  to  the  originality  and  depth 
of  Mr.  Malthus's  views  on  Population,  as  well  as  to  their  great  importance,  at 
the  time  he  first  gave  them  to  the  public ;  the  inaccuracy,  nevertheless,  in  his 
statement  of  the  general  proposition,  namely,  the  tendency  of  every  people  to 
increase  in  their  numbers,  more  rapidly  than  in  their  wealth,  is  clearly  pointed 
out,  and  the  errors  which  flow  from  it  satisfactorily  e'  '^ted.  "If  a  single 
country,''  says  Mr.  Senior,  "can  be  found  in  which'  "  .e  is  now  less  poverty 
than  is  universal  in  a  savage  state,  it  must  be  true,  that  under  the  circumstances, 
in  which  that  country  has  been  placed,  the  means  of  subsistence  have  a  greatei 
tendency  to  increase  than  the  population."  AMERICAN  EDITOR. 


CHAP.  XL  ON  DISTRIBUTION.  375 

and  honours  to  plurality  of  children ;  but  these  measures  were  fruit- 
less. There  is  no  difficulty  in  getting  children ;  the  difficulty  lies  in 
maintaining  them.  They  should  have  enlarged  their  internal  pro- 
duction, instead  of  spreading  devastation  amongst  their  neighbours. 
All  their  boasted  regulations  did  not  prevent  the  effectual  depopula- 
tion of  Italy  and  Greece,  even  long  before  the  inroads  of  the  bar- 
barous northern  hordes.* 

The  edict  of  Louis  XVI.  in  favour  of  marriage,  awarding  pensions 
to  those  parents  who  should  have  ten,  and  larger  ones  to  those  who 
should  have  twelve  chidren,  was  attended  with  no  better  success. 
The  premiums  that  monarch  held  out  in  a  thousand  ways  to  indo- 
lence and  uselessness,  were  much  more  adverse,  than  such  poor 
encouragements  could  be  conducive,  to  the  increase  of  population. 

It  is  the  fashion  to  assert,  that  the  discovery  of  the  new  world  has 
tended  to  depopulate  old  Spain;  whereas  her  depopulation  has  re- 
sulted from  the  vicious  institutions  of  her  government,  and  the  small 
amount  of  her  internal  product,  in  proportion  to  her  territorial  extent,  f 
The  most  effectual  encouragement  to  population  is,  the  activity  of 
industry,  and  the  consequent  multiplication  of  the  national  products. 
It  abounds  in  all  industrious  districts,  and,  when  a  virgin  soil  happens 
to  co-operate  with  the  exertions  of  a  community,  whence  idleness  is 
altogether  discarded,  its  rapid  increase  is  truly  astonishing.  In  the 
United  States  of  America,  population  has  been  doubling  in  the  course 
of  twenty  years. 

For  the  same  reasons,  although  temporary  calamities  may  sweep 
off  multitudes,  yet,  if  they  leave  untainted  the  source  of  reproduc- 
tion, they  are  sure  to  prove  more  afflicting  to  humanity,  than  fatal  to 
population.  It  soon  trenches  again  upon  the  limit,  assigned  by  the 
aggregate  of  annual  production.  Messance  has  given  some  very 
curious  calculations,  whereby  it  appears,  that  after  the  ravages  occa- 
sioned by  the  famous  plague  of  Marseilles  in  1720,  marriages  through- 
out Provence  were  more  fruitful  than  before.  The  Abbe  d'Expilly 
comes  to  the  same  conclusion.  The  same  effect  was  observable  in 
Prussia,  after  the  plague  of  1710.  Although  it  had  swept  off  a  third 
of  the  population,  the  tables  of  SussmilchJ  show  the  number  of 
births,  which,  before  the  plague,  amounted  annually  to  about  26,000, 
to  have  advanced  in  the  year  following,  1711,  to  no  less  than  32,000, 
It  might  have  been  supposed,  that  the  number  of  marriages,  after  so 
terrible  a  mortality,  \vou,d  have  been  at  least  considerably  reduced, 
on  the  contrary,  it  actually  doubled ;  a  strong  indication  of  the  ten- 
dency of  population  to  keep  always  on  a  level  with  the  national 
resources. 

The  loss  of  population  is  not  the  greatest  calamity  resulting  from 

*  Vide  Livii  Hist.  lib.  vi.  Plutarchi  Moralia,  xxx.  De  defectu  oraculorum 
Strabonif,  lib.  vii. 

•j-  Ustariz  has  remarked,  that  the  most  populous  provinces  of  Spain  are  tncee, 
from  which  there  has  been  the  greatest  emigration  to  America. 

I  Quoted  by  Malthus,  in  his  Essay  on  Popul.  voL  il 


376  ON  DISTRIBUTION.  BOOK  h 

such  temporary  visitations ;  the  first  and  greatest  is,  the  misery  they 
occasion  to  the  human  race.  Great  multitudes  can  not  be  swept  from 
the  land  of  the  living  by  pestilence,  famine  or  war,  without  the 
endurance  of  a  vast  deal  of  suffering  and  agony,  by  numbers  of  sen- 
tient beings;  besides  the  pain,  distress,  and  misery  of  the  survivors; 
the  destitution  of  widows,  orphans,  brothers,  sisters,  and  parents.  It 
is  a  subject  of  additional  regret,  if  among  the  rest,  there  happen  to 
fall  one  or  two  of  those  superior  and  enlightened  men,  whose  single 
talents  and  virtues  have  more  effect  upon  the  happiness  and  wealth 
of  nations,  than  the  grovelling  industry  of  a  million  of  ordinary  mortals. 

Moreover,  a  great  loss  of  human  beings,  arrived  at  maturity,  is 
certainly  a  loss  of  so  much  acquired  wealth  or  capital ;  for  every 
grown  person  is  an  accumulated  capital,  representing  all  the  ad- 
vances expended  during  a  course  of  many  years,  in  training  ana 
making  him  what  he  is.  A  bantling  a  day  old  by  no  means  replaces 
a  man  of  twenty;  and  the  well-known  expression  of  the  Prince  de 
Conde,  on  the  victorious  field  of  Senef,  was  equally  absurd  and 
unfeeling.* 

The  destructive  scourges  of  the  human  species,  therefore,  if  not 
injurious  to  population,  are  at  least  an  outrage  on  humanity;  on 
which  account  alone,  their  authors  are  highly  criminal.f 

But  though  such  temporary  calamities  are  more  afflicting  to  hu- 
manity than  hurtful  to  the  population  of  nations,  far  other  is  the 
effect  of  a  vicious  government,  acting  upon  a  bad  system  of  political 
economy.  This  latter  attacks  the  very  principle  of  population,  by 
drying  up  the  sources  of  production;  and  since  the  numbers  of 
mankind,  as  before  seen,  always  approach  nearly  to  the  utmost 

*  "Une  nuit  de  Paris  reparera  tout  cela."  It  requires  the  care  and  expendi- 
ture of  twenty  successive  years  to  replace  the  full-grown  man,  that  a  cannon- 
ball  has  destroyed  in  a  moment.  The  destruction  of  the  human  race  by  war  is  far 
more  extensive  than  is  commonly  imagined.  The  ravage  of  a  cultivated  district, 
the  plunder  of  dwelling-houses,  the  demolition  of  establishments  of  industry,  the 
consumption  of  capital,  &c.  &c.  deprive  numbers  of  the  means  of  livelihood,  and 
cause  many  more  to  perish,  than  are  left  on  the  field  of  battle. 

f  Upon  this  principle,  no  capital  improvement  of  the  medicinal  or  chirurgical 
art,  like  that  of  vaccination  for  instance,  can  permanently  influence  national 
population ;  yet  its  influence  upon  the  lot  of  humanity  may  be  very  considerable ; 
for  it  may  operate  powerfully  to  preserve  beings  already  far  advanced  in  age,  in 
strength,  and  in  knowledge :  whom  to  replace,  would  cost  fresh  births  and  fresh 
advances ;  in  other  words,  abundance  of  sacrifices,  privations,  and  sufferings 
both  to  the  parents  and  the  children.  When  population  must  be  kept  up  by  addi- 
tional births,  there  is  always  more  of  the  suffering  incident  to  the  entrance  and 
the  exit  of  human  existence ;  for  they  are  both  of  more  frequent  occurrence. 
Population  anay  be  kept  up  with  half  the  number  of  births  and  deaths,  if  the 
average  term  of  life  be  advanced  from  forty  to  fifty  years.  There  will,  indeed, 
be  a  greater  waste  of  the  germs  of  existence;  but  the  condition  of  mankind  must 
be  measured  by  the  quantum  of  human  suffering,  whereof  mere  germs  are  not 
susceptible.  The  waste  of  them  is  so  immense,  in  the  ordinary  course  of  nature, 
that  the  small  addition  can  be  of  no  consequence.  Were  the  vegetable  creation 
endowed  with  sensation,  the  best  thing  that  could  happen  to  it  would  be,  that 
'he  seeds  of  all  the  vegetables,  now  rooted  up  and  destroyed,  should  be  decom- 
posed before  the  vegetable  faculties  were  awakened. 


CHAP.  XI.  ON  DISTRIBUTION.  377 

limits  the  annual  revenue  of  the  nation  will  admit  of,  if  the  govern- 
ment reduce  that  revenue  by  the  pressure  of  intolerable  taxation, 
forcing  the  subject  to  sacrifice  part  of  his  capital,  and  consequently 
diminishing  the  aggregate  means  of  subsistence  and  reproduction 
possessed  by  the  community,  such  a  government  not  only  imposes 
a  preventive  check  on  further  procreation,  but  may  be  fairly  said 
to  commit  downright  murder;  for  nothing  so  effectually  thins  the 
effective  ranks  of  mankind,  as  privation  of  the  means  of  subsistence. 

The  evil  effects  of  monastic  establishments  upon  population,  have 
been  severely  and  justly  inveighed  against ;  but  the  mode,  in  which 
they  operate,  has  been  misunderstood;  it  is  the  idleness,  not  the 
celibacy,  of  the  monastic  orders,  that  ought  to  be  censured.  They 
put  their  lands  into  cultivation,  it  is  true,  but  where  is  the  merit  of 
that?  Would  the  lands  remain  untilled,  if  the  monastic  system 
were  abolished  ?  So  far  from  that  evil  resulting  from  the  abolition, 
wherever  these  establishments  have  been  converted  into  manufac- 
tories, of  which  the  French  revolution  has  offered  many  examples, 
equal  agricultural  produce  has  continued  to  be  raised,  and  the  pro- 
duce of  the  manufacturing  industry  has  been  all  clear  gain;  while 
the  increased  total  product,  thus  created,  has  been  followed  by  an 
increase  of  population  also. 

From  these  premises,  may  likewise  be  drawn  this  further  conclu- 
sion ;  that  the  inhabitants  of  a  country  are  not  more  scantily  supplied 
with  the  necessaries  of  life,  because  their  nunlber  is  on  the  increase; 
nor  more  plentifully,  because  it  is  on  the  decline.  Their  relative 
condition  depends  on  the  relative  quantity  of  products  they  have  at 
their  disposal;  and  it  is  easy  to  conceive  these  products  to  be  con- 
siderable, though  the  population  be  dense ;  and  scanty,  though  the 
population  be  thinly  spread.  Famine  was  of  more  frequent  occur- 
rence in  Europe  during  the  middle  ages,  than  it  has  been  of  late 
years,  although  Europe  is  evidently  more  thickly  peopled  at  present. 
The  product  of  England,  during  the  reign  of  queen  Elizabeth,  was 
not  nearly  so  abundant  as  it  is  now,  although  her  population  was 
then  less  by  half;  and  the  population  of  Spain,  reduced  to  but  eight 
millions,  enjoys  not  nearly  so  much  affluence,  as  when  it  amounted 
to  twenty-four.* 

Some  writers!  have  considered  a  dense  population  as  an  index  of 
national  prosperity ;  and,  doubtless,  it  is  a  certain  sign  of  enlarged 
national  production.  But  general  prosperity  implies  the  general  dif- 
fusion and  abundance  of  all  the  necessaries,  and  some  of  the  super- 
fluities of  life  amongst  all  classes  of  the  population.  Some  parts  of 
India  and  of  China  are  oppressed  with  population,  and  with  misery 
also ;  but  their  condition  would  be  nowise  improved  by  thinning  its 

*  If  population  depends  on  the  amount  of  product,  the  number  of  births  is  a 
very  imperfect  criterion,  by  which  to  measure  it.  When  industry  and  produce 
are  increasing,  births  are  multiplied  disproportionately  to  the  existing  population, 
so  as  to  swell  the  estimate;  on  the  contrary,  in  the  declining  state  of  national 
wealth,  the  actual  population  exceeds  the  average  ratio  to  the  births. 

f  Wallace,  Condorcet,  Godwin. 

32*  2X 


378  ON  DISTRIBUTION.  BOOK  H. 

numbers,  at  least  if  it  were  brought  about  by  a  diminution  of  the 
aggregate  product.  Instead  of  reducing  the  numbers  of  the  popula- 
tion, it  were  far  more  desirable  to  augment  the  gross  product;  which 
may  always  be  effected  by  superior  individual  activity,  industry, 
and  frugality,  and  the  better  administration,  that  is  to  say,  the  less 
frequent  interference  of  public  authority. 

But  it  will  naturally  be  asked,  if  the  population  of  a  country  re- 
gularly keeps  pace  with  its  means  of  subsistence,  what  will  become 
of  it  in  years  of  scarcity  and  famine  ? 

Hear  what  Stewart*  says  on  the  subject :  "  There  is  a  very  great 
deception  as  to  the  difference  between  crops ;  a  good  year  for  one 
soil  is  bad  for  another."  "  It  is  far  from  being  true,"  he  continues, 
"  that  the  same  number  of  people  consume  always  the  same  quan- 
tity of  food.  In  years  of  plenty,  every  one  is  well  fed  ; — food  is  not 
so  frugally  managed ;  a  quantity  of  animals  are  fatted  for  use ; — and 
people  drink  more  largely,  because  all  is  cheap.  A  year  of  scarcity 
comes;  the  people  are  ill  fed;  and  when  the  lower  classes  come  to 
divide  with  their  children,  the  portions  are  brought  to  be  very 
small;"  instead  of  saving,  they  consume  their  previous  hoard;  and 
after  all,  it  is  unhappily  too  true,  that  part  of  that  class  must  suffer 
and  perish. 

This  calamity  is  most  "common  in  countries  overflowing  with 
population,  like  Hindostan,  or  China,  where  there  is  little  external 
or  maritime  commerce,  and  where  the  poorer  classes  have  always 
been  strictly  limited  to  the  mere  necessaries  of  life.  There,  the 
produce  of  ordinary  years  is  barely  sufficient  to  allow  this  miserable 
pittance;  consequently,  the  slightest  failure  of  the  crop  leaves  mul- 
titudes wholly  destitute  of  common  necessaries,  to  rot  and  perish 
by  wholesale.  All  accounts  agree  in  representing  that  famines  are, 
for  this  reason,  very  frequent  and  destructive  in  China  and  many 
parts  of  Hindostan. 

Commerce  in  general,  and  maritime  commerce  in  particular 
facilitates  the  interchange  of  products,  even  with  the  most  remote 
countries,  and  thus  renders  it  practicable  to  import  articles  of  sub- 
sistence, in  return  for  several  other  kinds  of  produce;  but  too  great  a 
dependence  on  this  resource,  leaves  the  nation  at  the  mercy  of  every 
natural  or  political  occurrence,  which  may  happen  to  intercept  or 
derange  the  intercourse  with  foreign  countries.  The  intercourse 
must  then  be  preserved  at  all  events,  no  matter  whether  by  force  or 
fraud,  competition  must  be  got  rid  of  by  every  means,  however 
unjustifiable;  a  separate  province,  or  weak  ally,  perhaps,  is  obliged 
to  purchase  the  national  products,  under  restrictions  equally  galling, 
as  the  exaction  of  actual  tribute ;  and  a  commercial  monopoly  en- 
forced, even  at  the  hazard  of  a  war;  all  which  evils  make  the  state 
of  the  nation  extremely  precarious  indeed. 

The  produce  of  England,  in  articles  of  human  subsistence,  had 
undoubtedly  increased  largely  towards  the  end  of  the  18th  century; 

*  Sir  Tames,  of  Coltness,  book  i.  c.  17. 


CHAP.  XL  ON  DISTRIBUTION.  379 

but  its  produce  in  articles  of  apparel  and  household  furniture  had 
probably  increased  still  more  rapidly.  The  consequence  has  been, 
that  immensity  of  production,  which  enables  her  to  multiply  her 
population  beyond  what  the  produce  of  her  soil  can  support,*  and 
to  bear  up  under  the  pressure  of  public  burthens,  to  which  there  is 
no  parallel  nor  even  approximation.  But  England  has  suffered 
severely,  whenever  foreign  markets  have  been  shut  against  her 
produce ;  and  she  has  sometimes  been  obliged  to  resort  to  violent 
means  to  preserve  her  external  intercourse.  She  would  act  wisely, 
perhaps,  in  discontinuing  those  encouragements,  that  impel  fresh 
capital  into  the  channels  of  manufacture  and  external  commerce, 
and  directing  it  rather  towards  that  of  agricultural  industry.  It  is 
probable,  that  in  that  case,  several  districts,  which  have  not  yet 
received  the  utmost  cultivation  of  which  they  are  susceptible,  par- 
ticularly many  parts  of  Scotland  and  Ireland,  would  raise  agricul- 
tural produce  enough  to  purchase  most  part,  if  not  the  whole,  of  the 
surplus  product  of  her  manufactures  and  commerce  beyond  her 
present  consumption.!  Great  Britain  would  thereby  create  for  her- 
self a  domestic  consumption,  which  is  always  the  surest  and  the 
nost  advantageous.  Her  neighbours,  no  longer  offended  by  the 
necessarily  jealous  and  exclusive  nature  of  her  policy,  would  proba- 
bly lay  aside  their  hostile  feelings,  and  become  willing  customers. 
But,  after  all,  if  her  manufactured  should  still  be  disproportioned  to 
her  agricultural  produce,  what  is  there  to  prevent  her  from  adopting 
a  system  of  judicious  colonization,  and  thus  creating  for  herself  fresh 
markets  for  the  produce  of  her  domestic  industry  in  every  part  of 
the  globe,  whence  she  might  derive,  in  return,  a  supply  of  food  foi 
her  superfluous  population  ?J 

In  this  particular,  the  position  of  France  appears  to  be  precisely 
opposite  to  that  of  Great  Britain.  It  would  seem,  that  her  agricul- 
tural product  is  equal  to  the  maintenance  of  a  much  larger  manu- 
facturing and  commercial  population.  The  face  of  the  countuy  pre- 

*  In  a  pamphlet  entitled,  Considerations  on  British  Agriculture,  published  in 
1814,  by  W.  Jacob,  a  member  of  the  Royal  Society,  and  a  well-informed  writer 
upon  agricultural  topics,  we  are  told,  (p.  34,)  that  England  ceased  to  be  an  ex- 
porter, and  became  an  importer,  of  wheat,  about  the  year  1800. 

f  The  writer  last  cited  enters  into  long  details  to  show,  that  the  soil  of  the 
British  isles  could  be  made  to  produce  at  least  a  third  more  than  their  present 
product,  ibid.  p.  115.  et  seq. 

I  By  judicious  colonization,  I  mean  colonization  formed  on  the  principles  of 
complete  expatriation,  of  self-government  without  control  of  the  mother-country, 
and  of  freedom  of  external  relations;  but  with  the  enjoyment  of  protection  only 
by  the  mother-country,  while  it  should  continue  necessary.  Why  should  no. 
political  bodies  imitate  in  this  particular  the  relation  of  parent  and  child  1  When 
arrived  at  the  age  of  maturity,  the  personal  independence  of  the  child  is  both 
just  and  natural;  the  relation  it  engenders  is,  moreover,  the  most  lasting  and 
most  beneficial  to  both  parties.  Great  part  of  Africa  might  be  peopled  with 
European  colonies  formed  on  these  principles.  The  world  has  yet  room  enough, 
and  the  cultivated  land  on  the  face  of  the  globe  is  far  inferior  in  extent  to  the 
fertile  land  remaining  untilled.  The  earl  of  Selkirk  has  thrown  much  light  on 
this  matter,  in  his  tract  on  Emigration  and  the  State  of  the  Highlands, 


380  ON  DISTRIBUTION.  BOOK  IL 

sents  the  picture  of  high  and  general  cultivation ;  but  the  villages 
and  country  towns  are,  for  the  most  part,  surprisingly  small,  poor, 
ill-built,  and  ill-paved,  the  few  shops  scantily  supplied,  and  the  public 
houses  neither  neat  nor  comfortable.  It  is  plain,  the  agricultural 
product  must  either  be  less  than  the  appearance  would  indicate,  or 
it  must  be  consumed  in  a  thriftless  and  unprofitable  manner ;  proba- 
bly both  these  causes  are  in  operation. 

In  the  first  place,  the  production  is  far  less  than  it  might  be ;  and 
that  is  chiefly  owing  to  three  causes : — 1.  The  want  of  capital,  parti- 
cularly in  enclosures,  live  stock,  and  amelioration:*  2.  The  indolenco 
of  the  cultivators,  and  the  too  general  neglect  of  weeding,  trimming 
the  hedges,  clearing  the  trees  of  moss,  destroying  insects,  &c.  &c. 
3.  The  neglect  of  a  proper  alternation  of  crops,  and  of  the  most 
approved  methods  of  cultivation. 

In  the  second  place,  the  consumption  is  unthrifty  and  unprofitable; 
for  a  great  part  of  it  is  mere  waste,  and  yields  no  human  gratifica- 
tion whatever.  To  speak  of  one  article  alone,  that  is,  of  firing, 
which  is  an  object  of  great  value  in  districts,  where  coal  and  wood 
are  scarce ;  the  waste  of  it  is  enormous  in  the  huts  of  the  peasantry 
lighted  as  they  often  are  by  the  door-way  only,  and  admitting  the 
rain  down  the  chimney  while  the  fire  is  burning.  Unwholesome 
beverage  or  food,  and  the  indulgence  of  the  alehouse,  are  like  injuri- 
ous modes  of  consumption. 

In  fine,  towns  and  villages  would  be  more  thickly  spread,'  and 
would  besides  present  an  appearance  of  greater  affluence,  were  the 
generality  of  the  inhabitants  more  active  and  industrious,  and  actu- 
ated by  the  laudable  emulation,  tinctured  perhaps  with  some  little 
vanity,  rather  of  possessing  every  object  of  real  utility,  and  exhib- 
iting in  their  domestic  arrangements  the  utmost  order  and  neatness, 
than  of  living  in  indolence  upon  the  rent  of  a  trifling  patrimony, 
or  the  scanty  salary  of  some  useless  public  employ.  The  small 
proprietor,  with  an  income  of  3  or  400  dollars  per  annum,  just  suffi- 
cient to  vegetate  upon,  might  double  or  triple  it  perhaps  by  adding 
the  revenue  derivable  from  personal  industry;  and  even  those  en- 
gaged in  useful  occupations  do  not  push  them  to  the  full  extent  of 
their  activity  and  intelligence.  Moreover,  the  spirit  of  inquiry  and 
improvement  has  probably  been  disheartened  by  the  example  of 
frequent  ill  success;  although  the  failure  has  commonly  been  occa 
sioned  by  the  want  of  judgment,  perseverance,  and  frugality. 

National  population  is  'uniformly  proportionate  to  the  quantum 
of  national  production ;  but  it  may  vary  locally  within  the  limits  ot 
each  state,  according  to  the  favourable  or  unfavourable  operation 
of  local  circumstances.  A  particular  district  will  be  rich,  because 
its  soil  is  fertile,  its  inhabitants  industrious,  and  possessed  ot  capi- 

*  The  want  of  capital  prevents  the  employment  of  machinery  for  expediting 
the  operations,  like  the  thrashing  machine  in  common  use  in  England.  This 
makes  a  larger  supply  of  human  agency  requisite  in  agriculture ;  and  the  more 
mouths  there  are  to  be  fed,  die  smaller  will  be  the  surplus  produce,  which  alone 
ib  disposable. 


CHAP.  XI.  ON  DISTRIBUTION.  381 

tal  accumulated  by  their  frugality ;  in  like  manner  as  a  family  will 
surpass  its  neighbours  in  wealth,  because  of  its  superior  intelli- 
gence and  activity.  The  boundaries  and  political  constitutions  of 
states  affect  population  only,  inasmuch  as  they  affect  the  national 
production.  The  influence  of  religion  and  national  habits  upon 
population  is  precisely  analogous.  All  travellers  agree,  that  pro- 
testant  are  both  richer  and  more  populous  than  catholic  countries ; 
and  the  reason  is,  because  the  habits  of  the  former  are  more  con- 
ducive to  production. 


SECTION  II. 

Of  the  influence  of  the  Quality  of  a  national  product  upon  the  local  dis- 
tribution of  the  Population. 

For  the  earth  to  be  cultivated,  it  is  necessary  that  population 
should  be  spread  over  its  surface;  for  industry  and  commerce  to 
flourish,  it  is  desirable  to  collect  together  in  those  spots,  where  the 
arts  may  be  exercised  with  the  most  advantage;  that  is  to  say, 
where  there  can  be  the  greatest  subdivision  of  labour.  The  dyer 
naturally  establishes  himself  near  the  clothier;  the  druggist  near 
the  dyer ;  the  agent,  or  owner,  of  a  vessel  employed  in  the  transport 
of  drugs  will  approximate  in  locality  to  the  druggist ;  and  so  of 
other  producers  in  general. 

At  the  same  time,  all  such  as  live  without  labour  on  the  interest 
of  capital,  or  the  rent  of  landed  property,  are  attracted  to  the 
towns,  where  they  find  brought  to  a  focus,  every  luxury  to  feed 
their  appetites,  as  well  as  a  choice  of  society,  and  a  variety  of 
pleasure  and  amusement.  The  charms  of  a  town  life  attract  foreign 
visitors,  and  all  such  as  live  by  their  labour,  but  are  free  to  ex- 
ercise it  wherever  they  like.  Thus,  towns  become  the  abode  of 
literary  men  and  artizans,  and  likewise  the  seats  of  government, 
of  courts  of  justice,  arid  most  other  public  establishments;  and  their 
population  is  enlarged  by  the  addition  of  all  the  persons  attached 
to  such  establishments,  and  all  who  are  accidentally  brought  thither 
by  business. 

*  Not  but  what  there  is  always  a  number  of  country  residents, 
that  are  employed  in  manufacturing  industry,  exclusive  of  such  as 
make  it  their  abode  in  preference.  Local  convenience,  running 
•water,  the  contiguity  of  a  forest  or  a  mine,  will  draw  a  good  deal 
of  machinery,  and  a  number  of  labourers,  in  manufacture,  out  of 
the  precincts  of  towns.  There  are,  likewise,  some  kinds  of  work, 
which  must  be  performed  in  the  neighbourhood  of  the  consumers, 
that  of  the  tailor,  the  shoemaker,  or  the  farrier;  but  these  are 
trifling  compared  with  the  manufacturing  industry  of  all  kinds  exe- 
cuted in  towns. 

Writers  on  political  economy  have  calculated,  that  a  thriving 
country  fs  capable  of  supporting  in  its  towns,  a  population  equa' 


382  ON  DISTRIBUTION.  BOOK  II. 

to  that  of  the  country.  Some  examples  lead  to  an  opinion,  that  it 
could  support  a  still  greater  proportion,  were  its  industry  directed 
with  greater  skill  and  its  agriculture  conducted  with  more  intelligence 
and  less  waste,  even  supposing  its  soil  to  be  of  very  moderate  fer- 
tility.* Thus  much  at  least  is  certain,  that,  when  the  towns  raise  a 
product  for  foreign  consumption,  they  are  then  enabled  to  draw  from 
abroad  provisions  in  return,  and  may  sustain  a  population  much 
larger  in  proportion  to  that  of  the  country.  Of  this  we  have  instances 
in  the  numerous  petty  states,  whose  territory  alone  is  barely  suffi- 
cient to  afford  subsistence  to  one  of  the  suburbs  of  their  capital. 

Again,  the  cultivation  of  pasture  land,  requiring  much  Jess  human 
labour  than  that  of  arable,  it  follows,  that,  in  grazing  countries,  a 
greater  proportion  of  the  inhabitants  can  apply  themselves  to  the 
arts  of  industry;  whiclo  are  therefore  more  attended  to  in  pasture 
than  in  corn  countries.  Witness  Flanders,  Holland,  and  Normandy 
that  was.  (b) 

*  There  is  good  reason  to  believe,  that  the  total  population  of  England  is  more 
than  the  double  of  that  employed  in  her  internal  agriculture.  From  the  returns 
laid  before  parliament,  1811,  it  appears  there  were  in  Great  Britain,  inclusive  of 
Wales  and  Scotland,  895,998  families  employed  in  agriculture ;  and  that  the 
total  number  of  families  amounted  to  2,544,215,  which  would  give  but  a  third 
of  the  population  to  the  purposes  of  agriculture. 

According  to  Arthur  Young,  the  country  population  of  France,  within  her  old 
limits,  was 20,521,538 

And  that  of  the  cities  and  towns 5,709,270 


Making  a  total  of 26,230,808 

Supposing  him  to  be  correct,  France,  within  her  old  boundary,  could  main- 
tain, on  this  principle,  a  population  of  41  millions,  supposing  her  merely  to 
double  her  agricultural  population;  and  of  60  millions,  supposing  her  industry 
were  equally  active  with  that  of  Great  Britain,  (a) 

It  is  the  general  rema'rk  of  travellers,  that  the  traffic  of  the  great  roads  of 
France  is  much  less,  than  might  be  expected,  in  a  country  possessing  so  many 
natural  advantages.  This  may  be  attributed  chiefly  to  the  small  number  and 
size  of  her  towns ;  for  it  is  the  communication  from  town  to  town  that  peoples 
the  great  road ;  that  of  the  rural  population  being  principally  from  one  part  of 
the  village  or  farm  to  another. 

(a)  Our  author  has  here  fallen  into  a  palpaple  error.  The  ratio  of  the  agri- 
cultural, to  the  total  population  of  Great  Britain,  has  not  been  varied  as  above 
stated,  solely,  or  even  chiefly  by  the  multiplication  of  the  commercial  and  manu- 
facturing classes;  but  by  the  transfer  of  the  human  labour  spared  in  agriculture 
to  the  two  other  branches  of  industry.  Agriculture  might  occupy  one  third  only 
of  the  population  of  France,  and  yet  the  total  population  be  decreased  and  not 
multiplied.  T. 

(6)  This  position  is  too  general.  A  pastoral  nation,  devoting  the  whole  of  its 
territory  to  pasture,  could  spare  a  very  small  proportion  of  its  population  for 
commerce  and  manufacture ;  witness  Tartary  and  the  Pampas  of  South  America. 
Where  a  dense  manufacturing  and  commercial  population  makes  it  advantageous 
to  the  land-holder  to  devote  his  land  to  pasture,  and  look  to  foreigners  for  the 
supply  of  corn,  as  in  Holland,  a  small  proportion  of  the  population  may,  indeed, 
be  required  for  domestic,  but  a  large  proportion  will  be  required  for  the  anima 
tion  of  foreign  agriculture.  T. 


CHAP.  XL  ON  DISTRIBUTION.  383 

From  the  period  of  the  irruption  of  the  barbarians  into  the  Roman 
empire,  down  to  the  17th  century,  that  is  to  say,  to  a  date  almost 
within  living  memory,  the  towns  made  but  little  figure  in  the  larger 
states  of  Europe.  That  portion  of  the  population,  which  was 
thought  to  live  upon  the  cultivators  of  the  land,  was  not  then,  as 
now,  composed  principally  of  merchants  and  manufacturers,  but  con- 
sisted of  a  nobility,  surrounded  by  numerous  retainers,  of  churchmen 
and  other  idlers,  the  tenants  of  the  chateau,  the  abbey,  or  the  con- 
vent, with  their  several  dependencies ;  very  few  of  them  living  within 
the  towns.  The  products  of  manufacture  and  commerce  were  very 
limited  indeed ;  the  manufacturers  were  the  poor  cottagers,  and  the 
merchants  mere  pedlars ;  a  few  rude  implements  of  husbandry,  and 
some  very  clumsy  utensils  and  articles  of  furniture,  answered  all 
the  purposes  of  cultivation  and  ordinary  life.  The  fairs,  held  three 
or  four  times  in  the  year,  furnished  commodities  of  a  superior 
quality,  which  we  should  now  look  upon  with  contempt;  and  what 
rare  household  articles,  stuffs,  or  jewels,  of  price,  were  from  time 
to  time  imported  from  the  commercial  cities  of  Italy,  or  from  the 
Greeks  of  Constantinople,  were  regarded  as  objects  of  uncommon 
luxury  and  magnificence,  far  too  costly  for  any  but  the  richest 
princes  and  nobles. 

In  this  state  of  things,  the  towns  of  course  made  but  a  poor  figure. 
Whatever  magnificence  they  may  possess  in  our  time  is  of  very 
modern  date.  In  all  the  towns  of  France  together,  it  would  be 
impossible  to  point  out  a  single  handsome  range  of  buildings,  or  fine 
street,  of  two  hundred  years'  antiquity.  There  is  nothing  of  an- 
terior date,  with  the  exception  of  a  few  Gothic  churches,  but  clumsy 
tenements  huddled  together  in  dirty  and  crooked  streets,  utterly 
impassable  to  the  swarm  of  carriages,  cattle,  and  foot-passengers, 
that  indicates  the  present  population  and  opulence. 

No  country  can  yield  the  utmost  agricultural  produce  it  is  equa* 
to,  until  every  part  of  its  surface  be  studded  with  towns  and  cities. 
Few  manufactures  could  arrive  at  perfection,  without  the  conve- 
niences they  afford  ;  and,  without  manufactures,  what  is  there  to  give 
in  exchange  for  agricultural  products  ?  A  district  whose  agricultural 
products  can  find  no  market,  feeds  not  half  the  number  of  inhabit- 
ants it  is  capable  of  supporting;  and  the  condition,  even  of  those 
it  does  support,  is  rude  enough,  and  destitute  both  of  comfort  and 
refinement ;  they  are  in  the  lowest  stage  of  civilization.  But,  if  an 
industrious  colony  comes  to  establish  itself  in  the  district,  and  gra- 
dually forms  a  town,  whose  inhabitants  increase  till  they  equal  the 
numbers  of  the  original  cultivators,  the  town  will  find  subsistence 
on  the  agricultural  product  of  the  district,  and  the  cultivators  be 
enriched  by  the  product  of  the  industry  of  the  town. 

Moreover,  towns  offer  indirect  channels  for  the  export  of  the 
agricultural  values  of  the  district  to  a  distant  market.  The  raw 
products  of  agriculture  are  not  easy  of  transport,  because  the 
expense  soon  swallows  up  the  total  price  of  the  commodity  trans- 
ported. Manufactured  produce  has  greatly  the  advantage  in  this 


384  ON  DISTRIBUTION.  BOOK  IL 

respect;  for  industry  will  frequently  attach  very  considerable  value 
to  a  substance  of  little  bulk  and  weight.  By  the  means  of  manufac 
ture,  the  raw  products  of  national  agriculture  are  converted  into 
manufactured  goods  of  much  more  condensed  value,  which  will 
defray  the  charge  of  a  more  distant  transport,  and  bring  a  return 
of  produce  adapted  to  the  wants  of  the  exporting  country. 

There  are  many  of  the  provinces  of  France,  that  are  miserable 
enough  at  present,  yet  want  nothing  but  towns  to  bring  them  into 
high  cultivation.  Their  situation  would,  indeed,  be  hopeless,  were 
we  to  adopt  the  system  of  that  class  of  economists,  which  recom- 
mends the  purchase  of  manufactures  from  foreign  countries,  with 
the  raw  produce  of  domestic  agriculture.  (1) 

However,  if  towns  owe  their  origin  and  increase  to  the  concen 
tration  of  a  variety  of  manufactures,  great  and  small,  manufactures, 
again,  are  to  be  set  in  activity  by  nothing  but  productive  capital;  and 
productive  capital  is  only  to  be  accumulated  by  frugality  of  con- 
sumption. Wherefore,  it  is  not  enough  to  trace  the  plan  of  a  town, 
and  give  it  a  name;  before  it  can  have  real  existence,  it  must  be  gra- 
dually supplied  with  industrious  hands,  mechanical  skill,  implements 
of  trade,  raw  materials  and  the  necessary  subsistence  of  those  engaged 

(1)  [The  slow  progress  of  agriculture  in  these  provinces  of  France  is  not 
attributable  to  the  want  of  towns  in  the  midst  of  them ;  towns  and  cities  are  a 
consequence,  not  the  cause  of  the  general  prosperity  of  a  country.  Nor  would 
the  adoption  of  a  different  policy  from  that  which  recommends  the  purchase  of 
manufactures  from  foreign  countries  with  the  raw  produce  of  domestic  agricul- 
ture, improve  the  situation  of  these  districts.  A  system  of  policy  which  should 
attempt  by  restraints  or  encouragements,  to  divert  a  portion  of  the  capital  and 
industry  employed  in  agriculture  or  commerce  from  those  channels  towards  the 
erection  of  a  town,  or  the  establishment  of  a  manufactory,  with  a  view  to  pro- 
mote the  better  cultivation  of  the  soil,  would  be  subversive  of  this  end. 

To  what  causes  then  must  the  misery,  said  by  our  author  to  prevail  in  those 
provinces,  be  ascribed,  or  what  has  retarded  their  agricultural  improvement? 
The  prosperity  of  agriculture,  as  well  as  that  of  every  other  branch  of  industry, 
depends  upon  the  unrestrained  operation  of  individual  interest;  not  only  furnish- 
ing motives  to  exertion,  but  knowledge  to  direct  that  exertion.  All  that  is 
necessary  to  enable  a  state  to  reach  the  highest  pitch  of  opulence,  is  not  to  dis- 
turb the  action  of  this  important  principle.  The  obstacles,  it  will  accordingly 
be  found,  which  have  opposed  the  progress  of  improvement  in  the  countries 
alluded  to,  may  be  traced  to  the  interference  by  the  public  authorities  with  the 
salutary  operation  of  this  powerful  motive  of  action,  or,  in  other  words,  to  their 
bad  laws  and  political  institutions.  Sometimes  imposing  restraints  on  the  culti- 
vator, and  exposing  him  to  numberless  oppressions,  either  by  prescribing  the 
mode  in  which  the  soil  shall  be  cultivated,  or  the  products  it  shall  yield..  And, 
when  noi  thus  directly  interfering  with  the  business  of  production,  prohibiting1 
'.he  exportation  of  the  raw  produce  of  the  soil,  and  thereby  depriving  it  of  the 
best  market.  At  other  times  harassing  the  husbandman  with  taxation,  the 
shameful  inequalities  of  which,  whilst  they  relieve  the  higher  orders,  permit 
the  burden  to  fall,  almost  exclusively,  on  his  shoulders,  or  depriving  him  of  the 
freedom  of  trade  from  province  to  province  within  his  own  country  ;  but,  above 
all,  by  perpetuating  the  inheritance  of  landed  property  in  particular  bodies  or 
families,  without  the  power  of  alienation.  These  are  a  few  of  the  corrupt  and 
barbarous  laws  which  have  retarded  the  agriculture,  not  of  these  particulat 
provinces  of  France  only,  but  of  many  of  the  fairest  portions  of  Europe.] 

AMERICAN  EDITOR. 


C'HAP.  XT.  ON  DISTRIBUTION.  385 

in  industry,  until  the  completion  and  sale  of  their  products.  Other- 
wise, instead  of  founding  a  city,  a  mere  scaffolding  is  run  up,  which 
must  soon  fall  to  the  ground,  because  it  rests  upon  no  solid  founda- 
tion. This  was  the  case  with  regard  to  Ecatherinoslaw, .  in  the 
Crimea ;  and  was,  indeed,  foreseen  by  the  emperor  Joseph  II.,  who 
assisted  at  the  ceremony  of  its  foundation,  and  laid  the  second  stone 
in  due  form :  "  The  empress  of  Russia  and  myself,"  said  he  to  his 
suite,  "  have  completed  a  great  work  in  a  single  day :  she  has  laid 
the  first  stone  of  a  city,  and  I  have  laid  the  finishing  one." 

Nor  will  capital  alone  suffice  to  set  in  motion  the  mass  of  industry 
and  the  productive  energy  necessary  to  the  formation  and  aggran 
dizement  of  a  city,  unless  it  present  also  the  advantages  of  locality 
and  of  beneficent  public  institutions.  The  local  position  of  Washing- 
ton, it  should  seem,  is  adverse  to  its  progress  in  size  and  opulence: 
for  it  has  been  outstripped  by  most  of  the  other  cities  of  the  Union  ;(1) 
whereas,  Palmyra,  in  ancient  times,  grew  both  wealthy  and  popu- 
lous, though  in  the  midst  of  a  sandy  desert,  solely  because  it  had 
become  the  entrepot  of  commerce  between  Europe  and  eastern  Asia. 
The  same  advantage  gave  importance  and  splendour  to  Alexandria, 
and,  at  a  still  more  remote  period,  to  Egyptian  Thebes.  The  mere 
will  of  a  despot  could  never  have  made  it  a  city  of  a  hundred  gates, 
and  of  the  magnitude  and  populousness  recorded  by  Herodotus.  Its 
grandeur  must  have  been  owing  to  its  vicinity  to  the  Red  Sea  and 
the  channel  of  the  Nile,  and  to  its  central  position  between  India  and 
Europe,  (a) 

If  a  city  cannot  be  raised,  neither  does  it  seem,  that  its  further 
aggrandizement  can  be  arrested  by  the  mere  fiat  of  the  monarch. 
Paris  continued  to  increase,  in  defiance  of  abundance  of  regulations 
issued  by  the  government  of  the  day  to  limit  its  extension.  The 
only  effectual  barrier  is  that  opposed  by  natural  causes,  which  it 
would  be  very  difficult  to  define  with  precision,  for  it  consists  rather 
of  an  aggregate  of  little  inconveniences,  than  of  any  grand  or  posi- 

(a)  There  is  some  stretch  of  imagination  in  this.  Probably  the  Egyptian 
Thebes  was  itself  the  centre  of  manufacture  and  commerce  in  its  day,  and  not 
its  entrepot ;  indeed,  there  is  no  reason  to  suppose  a  very  active  intercourse  be- 
tween India  and  Europe  to  have  existed  at  so  early  a  period ;  and,  if  it  had, 
Thebes  would  hardly  have  been  the  entrepot.  But  central  India  furnishes  itself 
instances  of  cities  containing  as  large  a  population.  Nineveh  and  Babylon 
seem  to  have  been  quite  as  populous ;  each  was  probably  the  central  point  of  an 
enormous  domestic  industry.  T. 

(1)  [The  local  position  of  Washington,  perhaps,  is  not  as  advantageous  as 
that  of  some  of  the  other  cities  of  the  Union;  it  certainly,  however,  has  not  been 
adverse  to  its  progress  in  population  and  wealth.  In  the  year  1800,  when 
Washington  became  the  seat  of  the  general  government,  its  whole  population 
amounted  to  3,210 ;  according  to  the  census,  it  contained  in  1810,  8,208  inhabit- 
ants, in  1820,  13,247  inhabitants,  and  in  1830,  18,828  inhabitants.  In  the  year 
1820  the  whole  number  of  buildings  was  2,208,  of  which  925  were  of  brick. 
By  the  assessment  valuation  of  the  year  1830,  the  whole  number  of  buildings 
was  3,125.  It  cannot,  therefore,  be  said  to  have  been  outstripped  by  most  of 
the  otlier  cities  in  the  progress  of  improvement.]  AMERICAN  EDITOU. 

33  2  Y 


386  ON  DISTRIBUTION.  BOOK  II. 

live  obstruction.  In  overgrown  cities,  the  municipal  administration 
is  never  well  attended  to ;  a  vast  deal  of  valuable  time  is  lost  in  going 
from  one  quarter  to  another:  the  crossing  and  jostling  is  immense  in 
the  central  parts:  and  the  narrow  streets  and  passages,  having  been 
calculated  for  a  much  smaller  population,  are  unequal  to  the  vast 
increase  of  horses,  carriages,  passengers,  and  traffic  of  all  sorts. 
This  evil  is  felt  most  seriously  at  Paris,  and  accidents  are  growing 
more  frequent  every  day ;  yet  new  streets  are  now  building  on  the 
same  defective  plan,  with  a  certain  prospect  of  a  like  inconvenience 
in  i  very  few  years  hence. 


BOOK    III 

OF  THE  CONSUMPTION  OF  WEALTH 


CHAPTER  I. 

OP  THE  DIFFERENT  KINDS  OF  CONSUMPTION. 

IN  the  course  of  my  work,  I  have  frequently  been  obliged  to  an- 
ticipate the  explanation  of  terms  and  notions  which  in  the  natural 
order  should  have  been  postponed  to  a  later  period  of  the  investiga- 
tion. Thus  I  was  obliged  in  the  first  book  to  explain  the  sense,  in 
which  I  used  the  term,  consumption,  because  production  cannot  be 
effected  without  consumption. 

My  reader  will  have  seen  from  the  explanation  there  given,  that, 
in  like  manner  as  by  production  is  meant  the  creation,  not  of  sub- 
stance, but  of  utility,  so  by  consumption  is  meant  the  destruction  of 
utility,  and  not  of  substance,  or  matter.  When  once  the  utility  of  a 
thing  is  destroyed,  there  is  an  end  of  the  source  and  basis  of  its 
value ; — an  extinction  of  that,  which  made  it  an  object  of  desire  and 
of  demand.  It  thenceforward  ceases  to  possess  value,  and  is  no 
longer  an  item  of  wealth. 

Thus,  the  terms,  to  consume,  to  destroy  the  utility,  to  annihilate 
the  value  of  any  thing,  are  as  strictly  synonymous  as  the  opposite 
terms  to  produce,  to  communicate  utility,  to  create  value,  and  convey 
to  the  mind  precisely  the  same  idea.  Consumption,  then,  being  the 
destruction  of  value,  is  commensurate,  not  with  the  bulk,  the  weight, 
or  the  number  of  the  products  consumed,  but  with  their  value.  Large 
consumption  is  the  destruction  of  large  value,  whatever  form  that 
value  may  happen  to  have  assumed. 

Every  product  is  liable  to  be  consumed ;  because  the  value,  which 
can  be  added  to,  can  likewise  be  subtracted  from,  any  object.  If  it 
has  been  added  by  human  exertion  or  industry,  it  may  be  subtracted 
by  human  use,  or  a  variety  of  accidents.  But  it  cannot  be  more 
than  once  consumed;  value  once  destroyed  cannot  be  destroyed  a 
second  time.  Consumption  is  sometimes  rapid,  sometimes  gradual. 
A  house,  a  ship,  an  implement  of  iron,  are  equally  consumable  as  ?i 
loaf,  a  joint  of  meat,  or  a  coat.  Consumption  again  may  be  twt 


388  ON  CONSUMPTION.  BOOK  III. 

partial.  A  horse,  an  article  of  furniture,  or  a  house  when  re-sold 
by  the  possessor,  has  been  but  partially  consumed ;  there  is  still  a 
residue  of  value,  for  which  an  equivalent  is  received  in  exchange 
on  the  re-sale.  Sometimes  consumption  is  involuntary,  and  either 
accidental,  as  when  a  house  is  burnt,  or  a  vessel  shipwrecked,  or 
contrary  to  the  consumer's  intention,  as  when  a  cargo  is  thrown 
overboard,  or  stores  set  on  fire  to  prevent  their  falling  into  enemies' 
hands.  .  » 

Value  may  be  consumed,  either  long  after  its  production,  or  al 
the  very  moment,  and  in  the  very  act  of  production,  as  in  the  case 
of  the  pleasure  afforded  by  a  concert,  or  theatrical  exhibition.  Time 
and  labour  may  be  consumed ;  for  labour,  applicable  to  an  useful 
purpose,  is  an  object  of  value,  and  when  once  consumed,  can  never 
be  consumed  again. 

Whatever  cannot  possibly  lose  its  value  is  not  liable  to  consump- 
tion. A  landed  estate  cannot  be  consumed;  but  its  annual  productive 
agency  may;  for  when  once  that  agency  has  been  exerted,  it  cannot 
be  exerted  again.  The  improvements  of  an  estate  may  be  consumed, 
although  their  value  may  possibly  exceed  that  of  the  estate  itself; 
for  these  improvements  are  the  effect  of  human  exertion  and  indus- 
try ;  but  the  land  itself  is  inconsumable.* 

So  likewise  it  is  with  any  industrious  faculty.  One  may  consume 
a  labourer's  day's  work,  but  not  his  faculty  of  working;  which, 
however,  is  liable  to  destruction  by  the  death  of  the  person  pos- 
sessing it. 

All  products  are  consumed  sooner  or  later ;  indeed  they  are  pro- 
duced solely  for  the  purpose  of  consumption,  and,  whenever  the  con- 
sumption of  a  product  is  delayed  after  it  has  reached  the  point  of 
absolute  maturity,  it  is  value  inert  and  neutralized  for  the  time.  For 
as  all  value  may  be  employed  re-productively,  and  made  to  yield  a 
profit  to  the  possessor,  the  withholding  a  product  from  consumption 
is  a  loss  of  the  possible  profit,  in  other  words,  of  the  interest  its 
value  would  have  yielded,  if  usefully  employed.f 

*  Some  materials  are  capable  of  receiving  and  discharging  the  same  kind  of 
value  many  times  over;  as  linen,  which  will  undergo  repeated  washing.  The 
cleanliness  given  it  by  the  laundress,  is  a  value  wholly  consumed  on  each  occa- 
sion, along  with  a  part  of  that  of  the  linen  itself. 

f  The  values  not  consumed  sooner  or  later  in  a  useful  way  are  of  little  mo- 
ment; such  are  provisions  spoiled  by  keeping,  products  lost  accidentally,  and 
those  whose  use  has  become  obsolete,  or  which  have  never  been  used  at  all, 
owing  to  the  failure  of  the  demand  for  them,  wherein  value  originates.  Values 
buried,  or  concealed,  are  commonly  withdrawn  but  for  a  time  from  consumption  ; 
when  found,  it  is  always  the  interest  of  the  finder  to  turn  them  to  account, 
\vhich  he  cannot  do  without  submitting  them  to  consumption.  In  this  case, 
the  only  loss  is  that  of  the  profit  derivable  from  them  during  the  period  of  their 
disappearance,  and  may  be  reckoned  equivalent  to  the  interest  for  that  time. 

The  same  observation  applies  to  the  minute  savings,  successively  laid  by 
until  the  moment  of  investment,  the  aggregate  of  which  is,  doubtless,  conside- 
rable. The  loss,  resulting  from  this  inertness  of  capital,  may  be  partially  reme- 
died by  moderating  the  duties  on  transfer,  by  extending  to  the  utmost  the  facility 
of  circulation,  and  by  the  establishment  of  banks  of  deposite,  in  which  capita 


CHAP.  I.  ON  CONSUMPTION.  389 

But,  products  being  universally  destined  for  consumption,  and  that 
too  in  the  quickest  way,  how,  it  may  be  asked,  can  there  be  ever  an 
accumulation  of  capital,  that  is  to  say,  of  values  produced? 

I  answer — that  value  may  be  accumulated,  without  being  neces- 
sarily vested  all  the  while  in  the  same  identical  product,  provided 
only  it  be  perpetuated  in  some  product  or  other.  Now,  values  em- 
ployed as  capital  are  perpetuated  by  reproduction;  the  various 
products  of  which  capital  consists,  are  consumed  like  all  other  pro- 
ducts :  but  their  value  is  no  sooner  destroyed  by  consumption,  than 
it  re-appears  in  another,  or  a  similar  substance.  A  manufactory  can 
not  be  kept  up,  without  a  consumption  of  victuals  and  clothes  for 
the  workmen,  as  well  as  of  the  raw  material  of  manufacture;  but, 
while  value  in  those  forms  is  undergoing  consumption,  new  value  is 
communicated  to  the  object  of  manufacture*.  The  items  that  com- 
posed the  capital  so  expended,  are  consumed  and  gone;  but  the 
capital,  the  accumulated  value,  still  exists  and  re-appears  under  a 
new  form,  applicable  to  a  second  course  of  consumption.  Whereas, 
if  consumed  unproductively,  it  never  re-appears  at  all. 

The  annual  consumption  of  an  individual,  is,  the  aggregate  of  all 
the  values  consumed  by  that  individual  within  the  year.  The 
annual  consumption  of  a  nation  is,  the  aggregate  of  values  consumed 
within  the  year  by  all  the  individuals  and  communities,  whereof  the 
nation  consists. 

In  the  estimate  of  individual  or  national  consumption,  must  be 
included  every  kind  of  consumption,  whatever  be  its  motive  or  con- 
sequence, whether  productive  of  new  value  or  not ;  in  like  manner, 
as  the  estimate  of  the  annual  production  of  a  nation  comprises  the 
total  value  of  its  products  raised  within  the  year.  Thus,  a  soap 
manufactory  is  said  to  consume  such  or  such  a  quantity  or  value  of 
alkali  in  a  year,  although  this  value  be  re-produced  from  the  manu- 
factory in  the  shape  of  soap ;  on  the  other  hand,  it  is  said  to  produce 
annually  such  and  such  a  quantity  or  value  of  soap,  although  the 
production  may  have  cost  the  destruction  of  a  great  variety  of 
values,  which,  if  deducted,  would  vastly  reduce  the  apparent  pro- 
duct. By  annual  production,  or  consumption,  national  or  individual, 
is  therefore  meant,  the  gross  and  not  the  net  amount.* 

Whence  it  naturally  follows,  that  all  the  commodities,  which  a  na- 
tion imports,  must  be  reckoned  as  a  part  of  its  annual  product,  and  all 
its  exports  as  part  of  its  annual  consumption.  The  trade  of  France 
consumes  the  total  value  of  the  silk  it  exports  to  the  United  States; 
and  produces,  on  the  other  hand,  the  total  value  of  cotton  received 
in  return.  And,  in  like  manner,  the  manufacture  of  France  con- 

miy  be  safely  vested,  and  wnence  it  may  readily  be  withdrawn.  In  times  of 
political  confusion,  and  under  an  arbitrary  government,  many  will  prefer  to  keep 
their  capital  inactive,  concealed,  and  unproductive,  either  of  profit  or  gratification, 
r»ther  than  run  the  risk  of  its  display.  This  latter  evil  is  never  felt  under  a 
gr>otl  government. 

*  For  the  distinction  between  the  gross  and  the  net  product,  vide  sujn  a,  lloo* 
II.  chap.  5. 
33* 


396  ON  CONSUMPTION.  BOOK  III. 

sumes  the  value  of  alkali  employed  by  the  soap-boiler,  and  produces 
the  value  of  soap  derived  from  the  concern. 

The  total  annual  consumption  of  a  nation,  or  an  individual,  is  a  very 
different  thing  from  the  aggregate  of  capital.  A  capital  may  be 
wholly  or  partially  consumed  several  times  a  year.  When  a  shoe- 
maker buys  leather,  and  cuts  and  works  it  up  into  shoes,  there  is 
so  much  capital  consumed  and  reproduced.  Every  time  he  repeats 
the  operation,  there  is  so  much  more  capital  consumed.  Suppose 
the  leather  purchased  to  amount  to  40  dollars,  and  the  operation 
to  be  repeated  12  times  in  the  year,  there  will  have  been  an  annual 
consumption  of  480  dollars  upon  a  capital  of  40  dollars.  On  the 
other  hand,  there  may  be  portions  of  his  capital,  implements  of 
trade,  for  instance,  which  it  may  take  several  years  to  consume.  Of 
this  part  of  his  capital*  he  may  consume  annually  but  1-4  or  1-10 
perhaps. 

In  each  country  the  wants  of  the  consumer  determine  the  quality 
of  the  product.  The  product  most  wanted  is  most  in  demand  ;  and 
that  which  is  most  in  demand  yields  the  largest  profit  to  industry, 
capital,  and  land,  which  are  therefore  employed  in  raising  this 
particular  product  in  preference;  and,  vice  versa,  when  a  product 
becomes  less  in  demand,  there  is  a  less  profit  to  be  got  by  its  produc- 
tion; it  is,  therefore,  no  longer  produced.  All  the  stock  on  hand 
falls  in  price ;  the  low  price  encourages  the  consumption,  which  soon 
absorbs  the  stock  on  hand. 

The  total  national  consumption  may  be  divided  into  the  heads  of 
public  consumption*  and  private  consumption ;  the  former  is  effected 
by  the  public,  or  in  its  service ;  the  latter  by  individuals  or  families. 
Either  class  may  be  productive  or  unproductive. 

In  every  community  each  member  is  a  consumer;  for  no  one  can 
subsist,  without  the  satisfaction  of  some  necessary  wants,  however 
confined  and  limited;  on  the  other  hand,  all,  who  do  not  live  on 
mere  charity,  or  gratuitous  bounty,  contribute  somehow  to  produc- 
tion, by  their  industry,  their  capital,  or  their  land ;  wherefore,  the 
consumers  may  be  said  to  be  themselves  the  producers ;  and  the 
great  bulk  of  consumption  takes  place  amongst  the  middling  and 
poorer  classes,  whose  numbers  more  than  counterbalance  the  small- 
ness  of  the  share  allotted  to  each.* 

*  It  is  probable,  that,  in  all  countries,  anywise  advanced  in  industry,  the  reve- 
nues of  industry  exceed  those  of  capital  and  land  united,  and,  consequently,  that 
the  consumption  of  those  deriving  income  solely  from  industry,  and  wholly  de- 
pendent for  subsistence  upon  their  personal  faculties,  exceeds  that  of  Doth  capi- 
talists and  landlords  together.  It  is  not  uncommon  to  meet  with  a  manufactory, 
that,  with  a  capital,  say  of  120,000  dollars,  will  pay  daily  in  wages  to  its  people, 
60  dollars,  which,  with  the  deduction  of  Sundays  and  holidays,  makes  18,0()0 
dollars  per  annum ;  if  to  this  be  added,  4000  dollars  more  for  the  net  profits  of 
personal  superintendence  and  management,  it  will  give  a  total  of  22,000  dollars 
per  annum,  for  the  revenue  of  industry  alone.  The  same  capital,  vested  in  land 
at  bu  20  years'  purchase  would  yield  a  revenue  of  6000  dollars  only. 

Tne  cultivation  by  metayers,  the  very  lowest  description  of  farmers,  gives  to 
them,  and  their  subordinate  labourers'  industry,  a  revenue  equal  to  that  of  the 
land  jointly  with  the  capital,  which  is  advanced  by  the  proprietor. 


CHAP.  II.  ON  CONSUMPTION.  391 

Opulent,  civilised,  and  industrious  nations,  are  greater  consumers 
than  poor  ones,  because  tney  are  infinitely  greater  producers.  They 
annually,  and  in  some  cases,  several  times  in  the  course  of  the  yeai, 
re-consume  their  productive  capital,  which  is  thus  continually  reno- 
vated ;  and  consume  unproductively,  the  greater  part  of  their  reve- 
nues, whether  derived  from  industry,  from  capital,  or  from  land. 

It  is  not  uncommon  to  find  authors  proposing,  as  the  model  for 
imitation,  those  nations  whose  wants  are  few;  whereas,  it  is  far 
preferable  to  have  numerous  wants,  along  with  the  power  to  gratify 
them.  This  is  the  way  at  once  to  multiply  the  human  species,  and 
to  give  to  each  a  more  enlarged  existence. 

Stewart*  extols  the  Lacedaemonian  policy,  which  consisted  in 
practising  the  art  of  self-denial  in  the  extreme,  without  aiming  at 
progressive  advancement  in  the  art  of  production.  But  herein  the 
Spartans  were  rivalled  by  the  rudest  tribes  of  savages,  which  are 
commonly  neither  numerous  nor  amply  provided.  Upon  this  prin- 
ciple, it  would  be  the  very  acme  of  perfection  to  produce  nothing 
and  to  have  no  wants ;  that  is  to  say,  to  annihilate  human  existence. 


CHAPTER  H. 

OP  THE  EFFECT  OF  CONSUMPTION  IN  GENERAL 

THE  immediate  effect  of  consumption  of  everjfckind  is,  the  loss  of 
value,  consequently,  of  wealth,  to  the  owner  of  the  article  consumed. 
This  is  the  invariable  and  inevitable  consequence,  and  should  never 
be  lost  sight  of  in  reasoning  on  this  matter.  A  product  consumed 
is  a  value  lost  to  all  the  world  and  to  all  eternity ;  but  the  further 
consequence,  that  may  follow,  will  depend  upon  the  circumstances 
and  nature  of  the  consumption. 

If  the  consumption  be  unproductive,  there  usually  results  the 
gratification  of  some  want,  but  no  reproduction  of  value  whatever; 
if  productive,  there  results  the  satisfaction  of  no  want,  but  a  creation 
of  new  value,  equal,  inferior,  or  superior  in  amount  to  that  consumed, 
and  profitable  or  unprofitable  to  the  adventurer  accordingly.f 

*  Book  II.  chap.  14. 

f  This  may  be  illustrated  by  the  burning  of  fuel  in  a  grate  or  furnace.  The 
fuel  burnt,  serves  either  to  give  warmth,  or  to  cook  victuals,  boil  dyeing  ingre- 
dients, and  the  like,  and  thereby  to  increase  their  value.  There  is  no  utility  in 
the  mere  gratuitous  act  of  burning,  except  inasmuch  as  it  tends  to  satisfy  some 
human  want,  that  of  warmth  for  instance ;  in  which  case,  the  consumption  is 
unproductive;  or  inasmuch  as  it  confers  upon  a  substance  submitted  to  its  action, 
a  value,  that  may  replace  the  value  of  the  fuel  consumed ;  in  whicli  case  the 
consumption  is  productive. 

If  the  fuel,  burnt  for  the  sake  of  warmth,  produce  either  no  warmth  at  all,  01 
very  little ;  or  that  burnt  to  give  value  to  a  substance,  give  it  no  value,  or  a  less 
value  than  the  value  consumed  in  fuel,  the  consumption  will  be  ill-judged  an<! 
improvident. 


392  ON  CONSUMPTION.  BOOK  III. 

Thus,  consumption  may  be  regarded  as  an  act  of  barter,  wherein 
the  owner  of  the  value  consumed  gives  up  that  value  on  the  one 
hand,  and  receives  in  return,  either  the  satisfaction  of  a  personal 
want,  or  a  fresh  value,  equivalent  to  the  value  consumed. 

It  may  be  proper  here  to  remark,  that  consumption,  productive  of 
nothing  beyond  a  present  gratification,  requires  no  skill  or  talent  in 
the  consumer.  It  requires  neither  labour  nor  ingenuity  to  eat  a 
good  dinner,  or  dress  in  fine  clothes.*  On  the  contrary,  productive 
consumption,  besides  yielding  no  immediate  or  present  gratification, 
requires  an  exertion  of  combined  labour  and  skill,  or,  of  what  has 
all  along  been  denominated,  industry. 

When  the  owner  of  a  product  ready  for  consumption  has  himself 
no  industrious  faculty,  and  wishes,  but  knows  not  how  to  consume 
it  productively,  he  lends  it  to  some  one  more  industrious  than  him- 
self, who  commences  by  destroying  it,  but  in  such  a  way,  as  to 
reproduce  another,  and  thereby  enable  himself  to  make  a  full  resti- 
tution to  the  lender,  after  retaining  the  profit  of  his  own  skill  and 
labour.  The  value  returned  consists  of  different  objects  from  that 
lent,  it  is  true ;  indeed,  the  condition  of  a  loan  is  in  substance  this ; 
to  replace  the  value  lent,  of  whatever  amount,  say  2000  dollars,  at  a 
time  specified,  by  other  value,  equivalent  to  the  same  amount  of  silver 
coin  of  the  like  weight  and  quality  at  the  time  of  repayment.  An 
object,  lent  on  condition  of  specific  restitution,  cannot  be  available 
for  reproduction;  because,  by  the  terms  of  the  loan,  it  is  not  to  be 
consumed. 

Sometimes  a  prqducer  is  the  consumer  of  his  own  product;  as 
when  the  farmer  eats  his  own  poultry  or  vegetables ;  or  the  clothier 
wears  his  own  cloth.  But,  the  objects  of  human  consumption  being 
far  more  varied  and  numerous,  than  the  objects  of  each  person's  pro- 
duction respectively,  most  operations  of  consumption  are  preceded 
by  a  process  of  barter.  He  first  turns  into  money,  or  receives  in 
that  shape,  the  values  composing  his  individual  revenue;  and  then 
changes  again  that  money  for  the  articles  he  purposes  to  consume. 
Wherefore,  in  common  parlance,  to  spend  and  to  consume  have 
become  nearly  synonymous.  Yet,  by  the  mere  act  of  buying,  the 
value  expended  is  not  lost:  for  the  article  purchased  has  likewise  a 
value,  which  may  be  parted  with  again  for  what  it  cost,  if  it  has  not 
been  bought  over-dear.  The  loss  of  value  does  not  happen  till  the 
actual  consumption,  after  which  the  value  is  destroyed ;  it  then 
ceases  to  exist,  and  is  not  the  object  of  a  second  consumption.  For 
this  reason  it  is,  that  in  domestic  life,  the  bad  management  of  the 
wife  soon  runs  through  a  moderate  fortune ;  for  she  in  general  regu- 
lates the  daily  consumption  of  the  family,  which  is  the  chief  source 
of  expense,  and  one  that  is  always  recurring. 

*  There  is  unquestionably  a  sort  of  talent  requisite  in  the  expenditure  of  a 
large  income  with  credit  to  the  proprietor,  so  as  to  gratify  personal  taste,  with- 
out awakening  the  self-love  of  others;  to  oblige  without  the  sense  of  humilia- 
tion; to  labour  for  the  public  good,  without  alarming  individual  interests.  But 
this  kind  of  talent  is  referable  rather  to  the  head  of  practical,  whilst  its  influence 
upon  the  rest  of  mankind  falls  within  the  province  of  theoretical,  morality. 


CHAP.  HL  ON  CONSUMPTION.  393 

This  will  serve  to  expose  the  error  of  the  notion,  that  where  there 
is  no  loss  of  money,  there  can  be  no  loss  of  wealth.  It  is  the  com- 
monest thing  in  the  world  to  hear  it  roundly  asserted,  that  the 
money  spent  is  not  lost,  but  remains  in  the  country ;  and,  therefore, 
that  the  country  cannot  be  impoverished  by  its  internal  expenditure. 
It  is  true,  the  value  of  the  money  remains  as  before ;  but  the  object, 
or  the  hundred  objects,  perhaps,  that  have  been  successively  bought 
with  the  same  money,  have  been  consumed,  and  their  value  de- 
stroyed. 

Wherefore,  it  is  superfluous,  I  had  almost  said  ridiculous,  to  con- 
fine at  home  the  national  money,  for  the  purpose  of  preserving 
national  wealth.  Money  by  no  means  prevents  the  consumption  of 
value,  and  the  consequent  diminution  of  wealth ;  on  the  contrary,  it 
facilitates  the  arrival  of  consumable  objects  at  their  ultimate  destina- 
tion ;  which  is  a  most  beneficial  act,  when  the  end  is'  well  chosen, 
and  the  result  satisfactory.  Nor  would  it  be  correct  even  to  main- 
tain, that  the  export  of  specie  is  at  all  events  a  loss,  although  its 
presence  in  the  country  may  be  no  hindrance  to  consumption  or  to 
the  diminution  of  wealth.  For  unless  it  be  made  without  any  view 
to  a  return,  which  is  rarely  the  case,  it  is  in  fact  the  same  thing  as 
productive  consumption ;  being  merely  a  sacrifice  of  one  value,  for 
the  purpose  of  obtaining  another.  Where  no  return  whatever  is  in 
view,  there  indeed  is  so  much  loss  of  national  capital ;  but  the  loss 
would  be  quite  as  great,  were  goods,  and  not  money,  so  exported. 


CHAPTER  HI. 

OF  THE  EFFECT  OF  PRODUCTIVE  CONSUMPTION. 

THE  nature  of  productive  consumption  has  been  explained  above, 
in  Book  I.  The  value  absorbed  by  it  is  what  has  been  called  Capi- 
tal. The  trader,  manufacturer,  and  cultivator,  purchase  the  raw- 
material  *  and  productive  agency,  which  they  consume  in  the  prepa- 
ration of  new  products ;  and  the  immediate  effect  is  precisely  the 
same  as  that  of  unproductive  consumption,  namely,  to  create  a 
demand  for  the  objects  of  their  consumption,  which  operates  upon 
their  price,  and  upon  their  production;  and  to  cause  a  destruction 
of  value  But  the  ultimate  effect  is  different ;  there  is  no  satisfac- 
tion of  a  human  want,  and  no  resulting  gratification,  except  that 
accruing  to  the  adventurer  from  the  possession  of  the  fresh  product 

*The  raw  materials  of  manufacture  and  commerce  are,  the  products  bought 
with  a  view  to  the  communication  to  them  of  further  value.  Calicoes  are  raw 
material  to  the  calico-printer,  and  printed  calicoes  to  the  dealer  who  buys  them 
eor  re-sale  or  export.  In  commerce,  every  act  of  purchase  is  an  act  of  con- 
sumption: and  every  act  of  re-sale,  an  act  of  production. 

2Z 


ON  CONSUMPTION.  BOOK  IIL 

the  value  which  replaces  that  of  the  products  consumed,  and  com- 
monly affords  him  a  profit  into  the  bargain. 

To  this  position,  that  productive  consumption  does  not  imme- 
diately satisfy  any  human  want,  a  cursory  observer  may  possibly 
object,  that  the  wages  of  labour,  though  a  productive  outlay,  go  to 
satisfy  the  wants  of  the  labourer,  in  food,  raiment,  and  amusement 
perhaps.  But,  in  this  operation,  there  is  a  double  consumption;  1. 
Of  the  capital  consumed  productively  in  the  purchase  of  productive 
agency,  wherefrom  results  no  human  gratification :  2.  Of  the  daily  or 
weekly  revenue  of  the  labourer,  i.  e.  of  his  productive  agency,  the 
recompense  for  which  is  consumed  unproductively  by  himself  and 
his  family,  in  like  manner  as  the  rent  of  the  manufactory,  which 
forms  the  revenue  of  the  landlord,  is  by  him  consumed  unproduc- 
tively.  And  this  does  not  imply  the  consumption  of  the  same  value 
twice  over,  first  productively,  and  afterwards  unproductively;  for 
the  values  consumed  are  two  distinct  values  resting  on  bases  alto- 
gether different.  The  first,  the  productive  agency  of  the  labourer,  is 
the  effect  of  his  muscular  power  and  skill,  which  is  itself  a  positive 
product,  bearing  value  like  any  other.  The  second  is  a  portion  of 
capital,  given  by  the  adventurer  in  exchange  for  that  productive 
agency.  After  the  act  of  exchange  is  once  completed,  the  consump 
tion  of  the  value  given  on  either  side  is  contemporaneous,  but  with  a 
different  object  in  view ;  the  one  being  intended  to  create  a  new  pro- 
duct, the  other  to  satisfy  the  wants  of  the  productive  agent  and  his 
family.  Thus,  the  object,  expended  and  consumed  by  the  adven- 
turer, is  the  equivalent  he  receives  for  his  capital ;  and  that,  consumed 
unproductively  by  me  labourer,  is  the  equivalent  for  his  revenue. 
The  interchange  of  these  two  values  by  no  means  makes  them  one 
and  the  same. 

So  likewise,  the  intellectual  industry  of  superintendence  is  repro- 
ductively  consumed  in  the  concern ;  and  the  profits,  accruing  to  the 
adventurei  as  its  recompense,  are  consumed  unproductively  by  him- 
self and  his  family. 

In  short,  this  double  consumption  is  precisely  analogous  to  that 
of  the  raw  material  used  in  the  concern.  The  clothier  presents 
himself  to  the  wool-dealer,  with  1000  crowns  in  his  hand ;  there 
nre,  at  this  moment,  two  values  in  existence,  on  the  one  side,  that 
of  the  1000  crowns,  which  is  the  result  of  previous  production,  and 
now  forms  a  part  of  the  capital  of  the  clothier ;  on  the  other,  the 
wool  constituting  a  part  of  the  annual  product  of  a  grazing  farm. 
These  products  are  interchanged,  and  each  is  separately  consumed  ? 
the  capital  converted  into  wool,  in  a  way  to  produce  cloth ;  the  pro- 
duct of  the  farm,  converted  into  crown-pieces,  in  the  satisfaction  of 
the  wants  of  the  farmer,  or  his  landlord. 

Since  every  thing  consumed  is  so  much  lost,  the  gain  of  repro- 
ductive consumption  is  equal,  whether  proceeding  from  reduced  con- 
sumption, or  from  enlarged  production.  In  China,  ihey  make  a  great 
saving,  in  the  consumption  of  seed-corn,  by  following  the  drilling 
in  lieu  01  the  broad-cast,  method.  The  effect  of  this  saving  is  ;>re 


CHAP.  IIL  ON  CONSUMPTION.  395 

cisely  the  same,  as  if  the  land  were,  in  China,  proportionately  more 
productive  than  in  Europe.* 

In  manufacture,  when  the  raw  material  used  is  of  no  value  what- 
ever, it  is  not  to  be  reckoned  as  forming  any  part  of  the  requisite 
consumption  of  the  concern ;  thus,  the  stone  used  by  the  lime-burner, 
and  the  sand  employed  by  the  glass-blower,  are  no  part  of  their 
respective  consumption,  whenever  they  have  cost  them  nothing. 

A  saving  of  productive  agency,  whether  of  industry,  of  land,  or 
of  capital,  is  equally  real  and  effectual,  as  a  saving  of  raw  material ; 
and  it  is  practicable  in  two  ways ;  either  by  making  the  same  pro- 
ductive means  yield  more  agency ;  or  by  obtaining  the  same  result 
from  a  smaller  quantity  of  productive  means. 

Such  savings  generally  operate  in  a  very  short  time  to  the  bene- 
fit of  the  community  at  large ;  they  reduce  the  charges  of  produc- 
tion ;  and  in  proportion  as  the  economical  process  becomes  better 
understood,  and  more  generally  practised,  the  competition  of  pro- 
ducers brings  the  price  of  the  product  gradually  to  a  level  with  the 
charges  of  production.  But  for  this  very  reason,  all,  who  do  not 
learn  to  economise  like  their  neighbours,  must  necessarily  lose,  while 
others  are  gaining.  Manufacturers  have  been  ruined  by  hundreds, 
because  they  would  go  to  work  in  a  grand  style  with  too  costly  and 
complex  an  apparatus,  provided  of  course  at  an  excessive  expense 
of  capital. 

Fortunately,  in  the  great  majority  of  cases,  self-interest  is  most 
sensibly  and  immediately  affected  by  a  loss  of  this  kind ;  and  in  the 
concerns  of  business,  like  pain  in  the  human  frame,  gives  timely 
warning  of  injuries,  that  require  care  and  reparation.  If  the  rash 
or  ignorant  adventurer  in  production  wrere  not  the  first  to  suffer  the 
punishment  of  his  own  errors  or  misconduct,  we  should  find  it  far 
more  common  than  it  is  to  dash  into  improvident  speculation ;  which 
is  quite  as  fatal  to  public  prosperity,  as  profusion  and  extravagance. 
A  merchant,  that  spends  10,000  dollars  in  the  acquisition  of  6000 
dollars,  stands,  in  respect  to  his  private  concerns  and  to  the  general 
wealth  of  the  community,  upon  exactly  the  same  footing,  as  a  man 
of  fashion,  who  spends  4000  dollars  in  horses,  mistresses,  gluttony, 
or  ostentation ;  except,  perhaps,  that  the  latter  has  more  pleasure 
and  personal  gratification  for  his  money.f 

*  One  of  the  suite  of  Lord  Macartney  estimated  the  saving  of  grain  in  China, 
by  this  method  alone,  to  be  equal  to  the  supply  of  the  whole  population  of  Great 
Britain. 

f  There  is  almost  insuperable  difficulty  in  estimating  with  precision  the  con- 
sumption and  production  of  value ;  and  individuals  have  no  other  means  of 
knowing,  whether  their  fortune  be  increased  or  diminished,  except  by  keeping: 
regular  accounts  of  their  receipt  and  expenditure ;  indeed,  all  prudent  persons* 
are  careful  to  do  so,  and  it  is  a  duty  imposed  by  law  in  the  case  of  traders.  An 
adventurer  could  otherwise  scarcely  know  whether  his  concern  were  gainful  or 
losing,  and  might  be  involving  himself  and  his  creditors  in  ruin.  Besides  keep- 
ing regular  accounts,  a  prudent  manager  will  make  previous  estimates  of  the 
value  that  will  be  absorbed  in  the  concern,  and  of  its  probable  proceeds;  the  use 
of  which,  like  that  of  a  plan  or  design  in  building,  is  to  give  an  approximation, 
though  it  can  afford  no  certainty. 


X 

f 


396  ON  CONSUMPTION.  BOOK  in. 

What  has  been  said  on  this  subject  in  Book  I,  of  this  work,  makes 
it  needless  to  enlarge  here  on  the  head  of  productive  consumption. 
I  shall,  therefore,  henceforward  direct  my  reader's  attention  to 
the  subject  of  unproductive  consumption,  its  motives,  and  conse- 
quences ;  premising,  that  in  what  I  am  about  to  say,  the  word  con- 
sumption, used  alone,  will  import  unproductive  consumption,  as  it 
does  in  common  conversation. 


CHAPTER  IV. 

OF  THE  EFFECT  OF  UNPRODUCTIVE  CONSUMPTION  IN  GENERAL. 

HAVING  just  considered  the  nature  and  effect  of  consumption  in 
general,  as  well  as  the  general  effect  of  productive  consumption  in 
particular,  it  remains  only  to  consider,  in  this  and  the  following 
chapters,  such  consumption  as  is  effected  with  no  other  end  or  object 
in  view,  than  the  mere  satisfaction  of  a  want,  or  the  enjoyment  of 
some  pleasurable  sensation. 

Whoever  has  thoroughly  comprehended  the  nature  of  consump 
tion  and  production,  as  displayed  in  the  preceding  pages,  will  have 
arrived  at  the  conviction,  that  no  consumption  of  the  class  denomi- 
nated unproductive,  has  any  ulterior  effect,  beyond  the  satisfaction 
of  a  want  by  the  destruction  of  existing  value.  It  is  a  mere  ex- 
change of  a  portion  of  existing  wealth  on  the  one  side,  for  human 
gratification  on  the  other,  and  nothing  more.  Beyond  this,  what 
can  be  expected? — reproduction?  how  can  the  same  identical  utility 
be  afforded  a  second  time?  Wine  can  not  be  both  drunk  and  dis- 
tilled into  brandy  too.  Neither  can  the  object  consumed  serve  to 
establish  a  fresh  demand,  and  thus  indirectly  to  stimulate  future  pro- 
ductive exertion;  for  it  has  already  been  explained  that  the  only 
effectual  demand  is  created  by  the  possession  of  wherewithal  to 
purchase, — of  something  to  give  in  exchange;  and  what  can  that 
be,  except  a  product,  which,  before  the  act  of  exchange  and  con- 
sumption, must  have  been  an  item,  either  of  revenue  or  of  capital  ? 
The  existence  and  intensity  of  the  demand  must  invariably  depend 
upon  the  amount  of  revenue  and  of  capital :  the  bare  existence  of 
revenue  and  of  capital  is  all  that  is  necessary  for  the  stimulus  of 
production,  which  nothing  else  can  stimulate.  The  choice  of  one 
object  of  consumption  necessarily  precludes  that  of  another;  what 
is  consumed  in  the  shape  of  silks  cannot  be  consumed  in  the  shape 
of  linens  or  woollens;  nor  can  what  has  once  been  devoted  to 
pleasure  or  amusement,  be  made  productive  also  of  more  positive  01 
substantial  utility 

Wherefore  the  sole  object  of  inquiry,  with  regard  to  unpro 
ductive  consumption,  is,  the  degree  of  gratification  resulting  from  the 
net  of  consump  ion  itself:  and  this  inquiry  will,  in  the  remainder  of 


CHAP.  IV.  ON  CONSUMPTION.  397 

this  chapter,  be  pursued  in  respect  of  unproductive  consumption  in 
general,  after  which  we  shall  give  in  the  following  chapters,  a  sepa- 
rate consideration  to  that  of  individuals,  and  that  of  the  public,  or 
community  at  large.  The  sole  point  is,  to  weigh  the  loss,  occasioned 
to  the  consumer  by  his  consumption,  against  the  satisfaction  it 
affords  him.  The  degree  of  correctness,  with  which  the  balance  of 
loss  and  gain  is  struck,  will  determine  whether  the  consumption  be 
judicious  or  otherwise  ;  which  is  a  point  that  next  to  the  actual  pro- 
duction of  wealth,  has  the  most  powerful  influence  upon  the  well  or 
ill-being  of  families  and  of  nations. 

In  this  point  of  view,  the  most  judicious  kinds  of  consumption 
seem  to  be : — 

1.  Such  as  conduce  to  the  satisfaction  of  positive  wants;  by  which 
term  I  mean  those,  upon  the  satisfaction  of  which  depends  the  exist- 
ence, the  health,  and  the  contentment  of  the  generality  of  mankind ; 
being  the  very  reverse  of  such  as  are  generated  by  refined  sensuali- 
ty, pride,  and  caprice.  Thus,  the  national  consumption  will,  on  the 
whole,  be  judicious,  if  it  absorb  the  articles  rather  of  convenience 
than  of  display :  the  more  linen  and  the  less  lace;  the  more  plain  and 
wholesome  dishes,  and  the  fewer  dainties ;  the  more  warm  clothing, 
and  the  less  embroidery,  the  better.  In  a  nation  whose  consump- 
tion is  so  directed,  the  public  establishments  will  be  remarkable  rather 
for  utility  than  splendour,  its  hospitals  will  be  less  magnificent  than 
salutary  and  extensive ;  its  roads  well  furnished  with  inns,  rather 
than  unnecessarily  wide  and  spacious,  and  its  towns  well  paved, 
though  with  few  palaces  to  attract  the  gaze  of  strangers. 

The  luxury  of  ostentation  affords  a  much  less  substantial  and  solid 
gratification,  than  the  luxury  of  comfort,  if  I  may  be  allowed  the 
expression.  Besides,  the  latter  is  less  costly,  that  is  to  say,  involves 
the  necessity  of  a  smaller  consumption ;  whereas  the  former  is 
insatiable ;  it  spreads  from  one  to  another,  from  the  mere  proneness 
.to  imitation  ;  and  the  extent  to  which  it  may  reach,  is  as  absolutely 
unlimited,  (a)  "  Pride,"  says  Franklin,  "  is  a  beggar  quite  as  clam- 
orous as  want,  but  infinitely  more  insatiable." 

Taking  society  in  the  aggregate,  it  will  be  found  that,  one  with 
another,  the  gratification  of  real  wants  is  more  important  to  the 
community,  than  the  gratification  of  artificial  ones.  The  wants  of 
the  rich  man  occasion  the  production  and  consumption  of  an  exqui- 
site, perfume,  perhaps  those  of  the  poor  man,  the  production  and 
consumption  of  a  good  warm  winter  cloak ;  supposing  the  value  to 

(a)  It  is  strange,  that  so  acute  a  writer  should  not  have  perceived,  that  the 
mischief  of  pure  individual  vanity  can  never  be  very  formidable,  because  the 
pleasure  it  affords  loses  in  intensity,  in  proportion  to  its  diffusion.  Indeed  as 
far  as  individual  consumption  is  concerned,  attacks  upon  luxury  are  mere  idle 
declamations ;  for  the  productive  energies  of  mankind  will  always  be  directed 
towards  an  object,  with  a  force  and  in  a  degree  porportionate  to  the  intensity  of 
the  want  for  it.  It  is  the  extravagance  of  public  luxury  alone  that  can  ever  be 
formidable;  this,  as  well  as  public  consumption  of  every  kind,  it  is  always  the 
interest  of  the  community  at  large  to  contract,  and  that  of  public  functionaries  to 
expand,  to  thes  utmost  T. 
34 


398  ON  CONSUMPTION.  BOOK  III. 

be  equal,  the  diminution  of  the  general  wealth  is  the  same  in  both 
cases  ;  but  the  resulting  gratification  will,  in  the  one  case,  be  trifling, 
transient,  and  scarcely  perceptible ;  in  the  other,  solid,  ample,  and  of 
long  duration.* 

2.  Such  as  are  the  most  gradual,  and  absorb  products  of  the  best 
quality.  A  nation  or  an  individual,  will  do  wisely  to  direct  con- 
sumption chiefly  to  those  articles,  that  are  the  longest  time  in  wear- 
ing out,  and  the  most  frequently  in  use.  Good  houses  and  furniture 
are,  therefore,  objects  of  judicious  preference  ;  for  there  are  few  pro- 
ducts that  take  longer  time  to  consume  than  a  house,  or  that  are  of 
more  frequent  utility ;  in  fact,  the  best  part  of  one's  life  is  passed  in 
it.  Frequent  changes  of  fashion  are  unwise;  for  fashion  takes  upon 
itself  to  throw  things  away  long  before  they  have  lost  their  utility, 
and  sometimes  before  they  have  lost  even  the  freshness  of  novelty, 
thus  multiplying  consumption  exceedingly,  and  rejecting  as  good  for 
nothing  what  is  perhaps  still  useful,  convenient,  or  even  elegant.  So 
that  a  rapid  succession  of  fashions  impoverishes  a  state,  as  well  by 
the  consumption  it  occasions,  as  by  that  which  it  arrests. 

There  is  an  advantage  in  consuming  articles  of  superior  quality, 
although  somewhat  dearer,  and  for  this  reason :  in  every  kind  of 
manufacture,  there  are  .some  charges  that  are  always  the  same, 
whether  the  product  be  of  good  or  bad  quality.  Coarse  linen  will 
have  cost,  in  weaving,  packing,  storing,  retailing,  and  carriage, 
before  it  comes  to  the  ultimate  consumer,  quite  as  much  trouble  and 
labour,  as  linen  of  the  finest  quality,  therefore  in  purchasing  an  infe- 
rior quality,  the  only  saving  is  the  cost  of  the  raw  material :  the 
labour  and  trouble  must  always  be  paid  in  full,  and  at  the  same  rate ; 
yet  the  product  of  that  labour  and  trouble  are  much  quicker  con- 
sumed, when  the  linen  is  of  inferior,  than  when  it  is  of  superior 
quality. 

This  reasoning  is  applicable  indifferently  to  every  class  of  pro- 
duct; for  in  every  one  there  are  some  kinds  of  productive  agency, 
that  are  paid  equally  without  reference  to  quality ;  and  that  agency 
is  more  profitably  bestowed  in  the  raising  of  products  of  good  than 
of  bad  quality ;  therefore,  it  is  generally  more  advantageous  for  a 
nation  to  consume  the  former.  But  this  can  not  be  done,  unless  the 
nation  can  discern  between  good  and  bad,  and  have  acquired  taste 
for  the  former;  wherein  again  appears  the  necessity  of  knowledgef 
to  the  furtherance  of  national  prosperity ;  and  unless,  besides,  the 
bulk  of  the  population  be  so  far  removed  above  penury,  as  not  to 
be  obliged  to  buy  whatever  is  the  cheapest  in  the  first  instance,  al 
though  it  be  in  the  long-run  the  dearest  to  the  consumer. 

It  is  evident,  that  the  interference  of  public  authority  in  regu- 

*The  lending  at  interest  what  might  have  been  spent  in  frivolity  is  of  thia 
latter  class ;  for  interest  can  not  be  paid,  unless  the  loan  be  productively  em- 
ployed ;  in  which  case  it  will  go  in  part  to  the  maintenance  of  the  labouring 
Classes. 

f  By  knowledge,  I  would  always  be  understood  to  mean,  acquaintance  with 
.he  true  state  of  things,  or  generally  with  truth  in  every  branch. 


CHAP.  IV.  ON  CONSUMPTION.  399 

lating  the  details  of  the  manufacture,  supposing  it  to  succeed  in 
making  the  manufacturer  produce  goods  of  the  best  quality,  which 
is  very  problematical,  must  be  quite  ineffectual  in  promoting  their 
consumption ;  for  it  can  give  the  consumer,  neither  the  taste  of  \vhat 
is  of  the  better  quality,  nor  the  ability  to  purchase.  The  difficulty 
lies,  not  in  finding  a  producer,  but  in  finding  a  consumer.  It  will  be 
no  hard  matter  to  supply  good  and  elegant  commodities,  if  there  be 
consumers  both  willing  and  able  to  purchase  them.  But  such  a 
demand  can  exist  only  in  nations  enjoying  comparative  affluence ;  it 
is  affluence,  that  both  furnishes  the  means  of  buying  articles  of  good 
quality,  and  gives  a  taste  for  them.  Now  the  interference  of  author- 
ity is  not  the  road  to  affluence,  wrhich  results  from  activity  of  pro- 
duction, seconded  by  the  spirit  of  frugality; — from  habits  of  industry 
pervading  every  channel  of  occupation,  and  of  frugality  tending  to 
accumulation  of  capital.  In  a  country,  where  these  qualities  are 
prevalent,  and  in  no  other,  can  individuals  be  at  all  nice  or  fasti- 
dious in  what  they  consume.  On  the  contrary,  profusion  and  em- 
barrassment are  inseparable  companions ;  there  is  no  choice  when 
necessity  drives. 

The  pleasures  of  the  table,  of  play,  of  pyrotechnic  exhibitions, 
and  the  like,  are  to  be  reckoned  amongst  those  of  shortest  duration. 
I  have  seen  villages,  that,  although  in  want  of  good  water,  yet  do 
not  hesitate  to  spend  in  a  wake  or  festival,  that  lasts  but  one  day,  as 
much  money  as  would  suffice  to  construct  a  conduit  for  the  supply 
of  that  necessary  of  life,  and  a  fountain  or  public  cistern  on  the  vil- 
lage green;  the  inhabitants  preferring  tq  get  once  drunk  in  honour 
of  the  squire  or  saint,  and  to  go  day  after  day  with  the  greatest  in- 
convenience, and  bring  muddy  water  from  half  a  league  distance. 
The  filth  and  discomfort  prevalent  in  rustic  habitations  are  attributa- 
ble, partly  to  poverty,  and  partly  to  injudicious  consumption. 

In  most  countries,  if  a  part  of  what  is  squandered  in  frivolous 
and  hazardous  amusements,  whether  in  town  or  country,  were  "spent 
in  the  embellishment  and  convenience  of  the  habitations,  in  suitable 
clothing,  in  neat  and  useful  furniture,  or  in  the  instruction  of  the 
population,  the  whole  community  would  soon  assume  an  appearance 
of  improvement,  civilization,  and  affluence,  infinitely  more  attractive 
to  strangers,  as  well  as  more  gratifying  to  the  people  themselves. 

3.  The  collective  consumption  of  numbers.    There  are  some  kinds 
of  agency,  that  need  not  be  multiplied  in  proportion  to  the  increased 
consumption.     One  cook  can  dress  dinner  for  ten  as  easily  as  for 
one ;  the  same  grate  will  roast  a  dozen  joints  as  well  as  one ;  and 
this  is  the  reason,  why  there  is  so  much  economy  in  the  mess-table 
of  a  college,  a  monastery,  a  regiment,  or  a  large  manufactory,  in 
the  supply  of  great  numbers  from  a  common  kettle  or  kitchen,  and 
in  the  dispensaries  of  cheap  soups. 

4.  And  lastly,  on  grounds  entirely  different,  those  kinds  of  con 
sumption  are  judicious,  which  are  consistent  with  moral  rectitude  ; 
and,  on  the  contrary,  those,  which  infringe  its  laws,  generally  end 
in  public,  as  well  as  private  calamity.     But  it  would  be  too  wide  a 


400  ON  CONSUMPTION.  BOOK  IIL 

digression  from  my  subject  to  attempt  the  illustration  of  this  posi- 
tion. 

It  is  observable,  that  great  inequality  of  private  fortune  is  hostile 
to  those  kinds  of  consumption,  that  must  be  regarded  as  most  judi- 
cious. In  proportion  as  that  inequality  is  more  marked,  the  artifi- 
cial wants  of  the  population  are  more  numerous,  the  real  ones  more 
scantily  supplied,  and  the  rapid  consumption  more  common  and  de- 
structive. The  patrician  spendthrifts  and  imperial  gluttons  of  an- 
cient Rome  thought  they  never  could  squander  enough.  Besides, 
immoral  kinds  of  consumption  are  infinitely  more  general,  where  the 
extremes  of  wealtli  and  poverty  are  found  blended  together.  In 
such  a  state  of  society,  there  are  few,  who  can  indulge  in  the  re- 
finement of  luxury,  but  a  vast  number,  who  look  on  their  enjoy- 
ments with  envy,  and  are  ever  impatient  to  imitate  them.  To  get 
into  the  privileged  class  is  the  grand  object,  be  the  means  ever  so 
questionable;  and  those  who  are  little  scrupulous  in  the  acquire- 
ment, are  seldom  more  so  in  the  employment  of  wealth,  (a) 

The  government  has,  in  all  countries,  a  vast  influence,  in  deter- 
mining the  character  of  the  national  consumption;  not  only  because 
it  absolutely  directs  the  consumption  of  the  state  itself,  but  because  a 
great  proportion  of  the  consumption  of  individuals  is  gained  by  its 
will  and  example.  If  the  government  indulge  a  taste  for  splendour 
and  ostentation,  splendour  and  ostentation  will  be  the  order  of  the 
day,  with  the  whole  host  of  imitators ;  and  even  those  of  better 
judgment  and  discretion  must,  in  some  measure,  yield  to  the  tor 
rent.  For,  how  seldom  are  they  independent  of  that  consideration 
and  good  opinion,  which*  under  such  circumstances,  are  to  be 
earned,  not  by  personal  qualities,  but  by  a  course  of  extravagance 
they  can  not  approve  1 

First  and  foremost  in  the  list  of  injudicious  kinds  of  consumption 
stand  those  which  yield  disgust  and  displeasure,  in  lieu  of  the  grati- 
fication anticipated.  Under  this  class  may  be  ranged,  excess  and 
intemperance  in  private  individuals;  and,  in  the  state,  wars  under- 
taken with  the  motive  of  pure  vengeance,  like  that  of  Louis  XIV. 
in  revenge  for  the  attacks  of  a  Dutch  newspaper,  or  with  that  of 
empty  glory,  which  leads  commonly  to  disgrace  and  odium.  Yet 
such  wars  are  even  less  to  be  deplored  for  the  waste  of  national 
wealth  and  resources,  than  for  the  irremediable  loss  of  personal 
virtue  and  talent  sacrificed  in  the  struggle ;  a  loss  which  involves 

(a)  In  a  wholesome  state  of  society,  when  public  institutions  are  not  needless- 
ly multiplied,  and  all  tend  to  the  common  purpose  of  public  good,  this  very  im- 
patience and  anxiety  is  conducive  to  the  welfare,  and  not  to  the  injury,- of  so- 
ciety. Indeed,  great  inequality  of  fortune  seems  to  be  a  necessary  accompani- 
ment to  social  wealth  and  great  national  productive  power.  It  is  the  prospect 
of  great  prizes  only,  that  can  stimulate  to  the  extreme  of  intellectual  and  cor- 
poreal industry  ;  and  there  is  no  instance  on  record  of  a  nation  far  advanced  in 
industry,  in  which  great  inequality  of  fortune  has  not  existed.  One  bishopric  of 
Durham  will  tempt  more  clerical  adventurers,  than  five  hundrqd  moderate  bene- 
fices and  the  example  of  a  single  Arkwright  or  Peel  will  stimulate  manufac- 
turing science  and  activity  more  than  a  whole  Manchester  of  moderate  cotton 
spinning  concerns.  T. 


V.  ON  CONSUMPTION.  401 

families  in  distress  enough,  when  exacted  by  the  public  good,  and 
by  Jit,  ,.ressure  of  inexorable  necessity ;  but  must  be  doubly  shock- 
ing and  afflicting,  when  it  originates  in  the  caprice,  the  wickedness, 
Uie  lolly,  or -the  ungovernable  passions  of  national  rulers. 


CHAPTER  V. 

OP  INDIVIDUAL  CONSUMPTION-ITS  MOTIVES  AND  ITS  EFFECTS. 

THE  consumption  of  individuals,  as  contrasted  with  that  of  the 
public  or  community  at  large,  is  such  as  is  made  with  the  object  of 
satisfying  the  wants  of  families  and  individuals.  These  wants 
chiefly  consist  in  those  of  food,  raiment,  lodging,  and  amusement. 
They  are  supplied  with  the  necessary  articles  of  consumption  in 
each  department,  out  of  the  respective  revenue  of  each  family  or 
individual,  whether  derived  from  personal  industry,  from  capital,  or 
from  land.  The  wealth  of  a  family  advances,  declines,  or  remains 
stationary,  according  as  its  consumption  equals,  exceeds,  or  falls 
short  of  its  revenue.  The  aggregate  of  the  consumption  of  all  the 
individuals,  added  to  that  of  the  government  for  public  purposes, 
forms  the  grand  total  of  national  consumption. 

A  family,  or  indeed  a  community,  or  nation,  may  certainly  con- 
sume the  whole  of  its  revenue,  without  being  thereby  impoverished ; 
but  it  by  no  means  follows,  that  it  either  must,  or  wrould  act  wisely, 
in  so  doing.  Common  prudence  would  counsel  to  provide  against 
casualties.  Who  can  say  with  certainty,  that  his  income  will  not 
fall  off,  or  that  his  fortune  is  exempt  from  the  injustice,  the  fraud,  or 
the  violence  of  mankind  ?  Lands  may  be  confiscated  ;  ships  may  be 
wrecked ;  litigation  may  involve  him  in  its  expenses  and  uncertain- 
ties. The  richest  merchant  is  liable  to  be  ruined  by  one  unlucky 
speculation,  or  by  the  failure  of  others.  Were  he  to  spend  his 
whole  income,  his  capital  might,  and  in  all  probability  would,  be 
continually  on  the  decline. 

But,  supposing  it  to  remain  stationary,  should  one  be  content  with 
keeping  it  so?  A  fortune,  however  large,  will  seem  little  enough, 
when  it  comes  to  be  divided  amongst  a  number  of  children.  And, 
even  if  there  be  no  occasion  to  divide  it,  what  harm  is  there  in  en- 
larging it ;  so  it  be  done  by  honourable  means  ?  what  else  is  it,  but 
the  desire  of  each  individual  to  better  his  situation,  that  suggests 
the  frugality  that  accumulates  capital,  and  thereby  assists  the  pro 
gress  of  industry,  and  leads  to  national  opulence  and  civilisation7 
Had  not  previous  generations  been  actuated  by  this  stimulus,  tno 
present  one  would  now  be  in  the  savage  state ;  and  it  is  impossible 
to  say,  how  much"  farther  it  may  yet  be  possible  to  carry  civilizat.'cru 
It  has  never  been  proved  to  my  satisfaction,  that  nine-tenths  of  the 
34  *  3  A 


402  ON  CONSUMPTION.  BOOK  III 

population  must  inevitably  remain  in  that  degree  of  misery  and 
semi-barbarism,  which  they  are  found  in  at  present  in  most  coun- 
tries of  Europe. 

The  observance  of  the  rules  of  private  economy  keeps  the  con- 
sumption of  a'  family  within  reasonable  bounds :  that  is  to  say,  the 
bounds  prescribed  in  each  instance  by  a  judicious  comparison  of  the 
value  sacrificed  in  consumption,  with  the  satisfaction  it  affords. 
None  but  the  individual  himself,  can  fairly  and  correctly  estimate 
the  loss  and.  gain,  resulting  to  himself  or  family  from  each  particu- 
lar act  of  consumption ;  for  the  balance  will  depend  upon  the  for- 
tune, the  rank,  and  the  wants  of  himself  and  family ;  and,  in  some 
degree,  perhaps,  upon  personal  taste  and  feelings.  To  restrain  con- 
sumption within  too  narrow  limits,  would  involve  the  privation  of 
gratification  that  fortune  has  placed  within  reach ;  and,  on  the  other 
hand,  a  too  profuse  consumption  might  trench  upon  resources,  that 
it  might  be  but  common  prudence  to  husband.* 

Individual  consumption  has  constant  reference  to  the  character 
and  passions  of  the  consumer.  It  is  influenced  alternately  by  the 
noblest  and  the  vilest  propensities  of  our  nature;  at  one  time  it  is 
stimulated  by  sensuality ;  at  another  by  vanity,  by  generosity,  by 
revenge,  or  even  by  covetousness.  It  is  checked  by  prudence  or 
foresight,  by  groundless  apprehension,  by  distrust,  or  by  selfishness. 
As  these  various  qualities  happen  in  turn  to  predominate,  they  direct 
mankind  in  the  use  they  make  of  their  wealth.  In  this,  as  in  every 
other  action  of  life,  the  line  of  true  wisdom  is  the  most  difficult  to 
observe.  Human  infirmity  is  perpetually  deviating  to  the  one  side 
or  the  other,  and  seldom  steers  altogether  clear  of  excess.f 

In  respect  to  consumption,  prodigality  and  avarice  are  the  two 
faults  to  be  avoided :  both  of  them  neutralize  the  benefits  that  wealth 
is  calculated  to  confer  on  its  possessor ;  prodigality  by  exhausting, 
avarice  by  not  using,  the  means  of  enjoyment.  Prodigality  is, 
indeed,  the  more  amiable  of  the  two,  because  it  is  allied  to  many 
amiable  and  social  qualities.  It  is  regarded  with  more  indulgence, 
because  it  imparts  its  pleasures  to  others;  yet  it  is  of  the  two  the 
more  mischievous  to  society  ;  for  it  squanders  and  makes  away  with 
the  capital  that  should  be  the  support  of  industry ;  it  destroys  indus- 

*  On  this  ground  sumptuary  laws  are  superfluous  and  unjust.  The  indulgence 
proscribed  is  either  within  the  means  of  the  individual  or  not :  in  the  former 
case,  it  is  an  act  of  oppression  to  prohibit  a  gratification  involving  no  injury  to 
others,  equally  unjustifiable  as  prohibition  in  any  other  particular ;  in  the  latter, 
it  is  at  all  events  nugatory  to  do  so ;  for  there  is  no  occasion  for  legal  interfer- 
ence, where  pecuniary  circumstances  alone  are  an  effectual  bar.  Every  irregu- 
larity of  this  kind  works  its  own  punishment.  It  has  been  said,  that  it  is  th° 
duty  of  the  government  to  check  those  habits,  which  have  a  tendency  to  lead 
people  into  expenses  exceeding  their  means ;  but  it  will  be  found,  that  such 
habits  can  only  be  introduced  by  the  example  and  encouragement  of  the  public 
authorities  themselves.  In  all  other  circumstances,  neither  custom  nor  fashion 
will  ever  lead  the  different  classes  of  society  into  any  expenses,  but  what  are 
suitable  to  their  respective  means. 

f  The  weaker  sex  is,  from  the  very  circumstance  of  inferiority  inslrengtr)  ot 
mind;  exposed  to  greater  excess  both  of  avarice  and  prodigality. 


CHAP.  V.  ON  CONSUMPTION. 

try,  the  grand  agent  of  production,  by  the  destruction  of  the  other 
agent,  capital.  If,  by  expense  and  consumption,  are  meant  those 
kinds  only  which  minister  to  our  pleasures  and  luxuries,  it  is  a  great 
mistake  to  say  that  money  is  good  for  nothing  but  to  be  spent,  and 
that  products  are  only  raised  to  be  consumed.  Money  may  be  em- 
ployed in  the  work  of  re-production ;  when  so  employed,  it*  must  be 
productive  of  great  benefit;  and,  every  time  that  a  fixed  capital  is 
squandered,  a  corresponding  quantity  of  industry  must  be  extinguisn- 
ed,  in  some  quarter  or  other.  The  spendthrift,  in  running  througn 
his  fortune,  is  at  the  same  time  exhausting,  pro  tanlo,  the  source  of 
the  profits  upon  industry. 

The  miser,  who,  in  the  dread  of  losing  his-  money,  hesitates  to  turn 
it  to  account,  does,  indeed,  nothing  to  promote  the  progress  of  indus- 
try ;  but  at  least  he  can  not  be  said  to  reduce  the  means  of  produc- 
tion. His  hoard  is  scraped  together  by  the  abridgment  of  his  per- 
sonal gratifications,  not  at  the  expense  of  the  public,  according  to 
the  vulgar  notion  ;  it  has  been  withdrawn  from  no  productive  occu- 
pation, and  will  at  any  rate  re-appear  at  his  death,  and  be  available 
for  the  purpose  of  extending  the  operations  of  industry,  if  it  be  not 
squandered  by  his  heirs,  or  so  effectually  concealed,  as  to  evade  all 
search  or  recovery. 

It  is  absurd  in  spendthrifts  to  boast  of  their  prodigality,  which  is 
quite  as  unworthy  the  nobleness  of  our  nature,  as  the  sordid  mean- 
ness of  the  opposite  character.  There  is  no  merit  in  consuming  all 
one  can  lay  hands  upon,  and  desisting  only  when  one  can  get  no 
more  to  consume;  every  animal  can  do  as  much;  nay,  there  are 
some  animals  that  set  a  better  example  of  provident  management. 
It  is  more  becoming  the  character  of  a  being  gifted  with  reason  and 
foresight,  never  to  consume,  in  any  instance,  without  some  reasona- 
ble object  in  view.  At  least,  this  is  the  course  that  economy  would 
prescribe. 

In  short,  economy  is  nothing  more  than  the  direction  of  human 
consumption  with  judgment  and  discretion, — the  knowledge  of  our 
means,  and  the  best  mode  of  employing  them.  There  is  no  fixed 
rule  of  economy ;  it  must  be  guided  by  a  reference  to  the  fortune 
condition,  and  wants  of  the  consumer.  An  expense,  that  may  be 
authorized  by  the  strictest  economy  in  a  person  of  moderate  fortune, 
would,  perhaps,  be  pitiful  in  a  rich  man,  and  absolute  extravagance 
in  a  poor  one.  In  a  state  of  sickness,  a  man  must  allow  himself  in- 
dulgences, that  he  would  not  think  of  in  health.  An  act  of  benefi- 
cence, that  trenches  on  the  personal  enjoyments  of  the  benefactor, 
is  deserving  of  the  highest  praise ;  but  it  would  be  highly  blamable, 
if  done  at  the  expense  of  his  children's  subsistence. 

Economy  is  equally  distant  from  avarice  and  profusion.  Avarice 
hoards,  not  for  the  purpose  of  consuming  or  re-producing,  but  for 
the  mere  sake  of  hoarding ;  it  is  a  kind  of  instinct,  or  mechanical 
impulse,  much  to  the  discredit  of  those  in  whom  it  is  detected  ; 
whereas,  true  economy  is  the  offspring  of  prudence  and  sound  rea 
son.  and  does  not  sacrifice  necessaries  to  superfluities,  like  the  miser 


404  ON  CONSUMPTION.  BOOK  UI. 

when  he  denies  himself  present  comforts,  in  the  view  of  luxury,  e\er 
prospective  and  never  to  be  enjoyed.  The  most  sumptuous  enter 
tainment  may  be  conducted  with  economy,  without  diminishing,  but 
rather  adding  to  its  splendour,  which  the  slightest  appearance  of 
avarice  would  tarnish  and  deface.  The  economical  man  balances 
his  means  against  his  present  or  future  wants,  and  those  of  his  family 
and  friends,  not  forgetting  the  calls  of  humanity.  The  miser  regards 
neither  family  nor  friends ;  scarcely  attends  to  his  own  personal 
wants,  and  is  an  utter  stranger  to  those  of  mankind  at  large.  Econ- 
omy never  consumes  without  an  object ;  avarice  never  willingly 
consumes  at  all ;  the  one  is  a  sober  and  rational  study,  the  only  one 
that  supplies  the  means  of  fulfilling  our  duties,  and  being  at  the  same 
time  just  and  generous;  the  other,  a  vile  propensity  to  sacrifice 
every  thing  to  the  sordid  consideration  of  self. 

Economy  has  not  unreasonably  been  ranked  among  the  virtues  of 
mankind ;  for,  like  the  other  virtues,  it  implies  self-command  and 
control ;  and  is  productive  of  the  happiest  consequences ;  the  good 
education  of  children,  physical  and  moral ;  the  careful  attendance 
of  old  age ;  the  calmness  of  mind,  so  necessary  to  the  good  conduct 
of  middle  life ;  and  that  independence  of  circumstances  which  alone 
can  secure  against  mercenary  motives,  are  all  referable  to  this 
quality.  Without  it  there  can  be  no  liberality,  none  at  least  of  a 
permanent  and  wholesome  kind ;  for,  when  it  degenerates  into  prodi- 
gality, it  is  an  indiscriminate  largess,  alike  to  deserving  and  unde- 
serving ;  stinting  those  who  have  claims  in  favour  of  those  who  have 
none.  It  is  common  to  see  the  spendthrift  reduced  to  beg  a  favour 
from  people  that  he  has  loaded  with  his  bounty ;  for  what  he  gives 
now,  one  expects  a  return  will  some  day  be  called  for ;  whereas, 
the  gifts  of  the  economical  man  are  purely  gratuitous  ;  for  he  never 
gives  except  from  his  superfluities.  The  latter  is  rich  with  a  mode- 
rate fortune;  but  the  miser  and  the  prodigal  are  poor,  though  in 
possession  of  the  largest  resources. 

Economy  is  inconsistent  with  disorder,  which  stumbles  blindfold 
over  wealth,  sometimes  missing  what  it  most  desires,  although  close 
within  its  reach,  and  sometimes  seizing  and  devouring  what  it  is 
most  interested  in  preserving;  ever  impelled  by  the  occurrences  of 
the  moment,  which  it  either  can  not  foresee,  or  can  not  emancipate 
itself  from  ;  and  always  unconscious  of  its  own  position,  and  utterly 
incapable  of  choosing  the  proper  course  for  the  future.  A  house- 
hold, conducted  without  order,  is  preyed  upon  by  all  the  world  : 
neither  the  fidelity  of  the  servants,  nor  even  the  parsimony  of  the 
master,  can  save  it  from  ultimate  ruin.  For  it  is  exposed  to  the 
perpetual  lecurrence  of  a  variety  of  little  outgoings,  on  every  occa- 
sion, however  trivial.* 

*  I  remember  being  once  in  the  country  a  witness  of  the  numberless  minute 
losses  that  neglectful  housekeeping  entails.  For  want  of  a  trumpery  latch,  the 
irate  of  the  poultry-yard  was  forever  open:  there  being  no  means  of  closing  it 
"'•ternally,  it  was  on  the  swing  every  time  a  person  went  out;  and  many  of  the 


CHA.P.  V.  ON  CONSUMPTION.  405 

Among  the  motives  that  operate  to  determine  the  consumption 
nf  individuals,  the  most  prominent  is  luxury,  that  frequent  theme 
of  declamation,  which,  however,  I  should  probably  not  have  dwelt 
upon,  could  I  expect  that  every  body  would  take  the  trouble  of  ap- 
plying the  principles  I  have  been  labouring  to  establish ;  and  were 
it  not  always  useful  to  substitute  reason  for  declamation. 

Luxury  has  been  defined  to  be,  the  use  of  superfluities.*  For  my 
own  part,  I  am  at  a  loss  to  draw  the  line  between  superfluities  and 
necessaries ;  the  shades  of  difference  are  as  indistinct  and  completely 
blended  as  the  colours  of  the  rainbow. 

Taste,  education,  temperament,  bodily  health,  make  the  degrees 
of  utility  and  necessity  infinitely  variable,  and  render  it  impossible 
to  employ  in  an  absolute  sense,  terms,  which  always  of  necessity 
convey  an  idea  of  relation  and  comparison. 

The  line  of  demarcation  between  necessaries  and  superfluities  shifts 
with  the  fluctuating  condition  of  society.  Strictly  speaking,  man- 
kind might  exist  upon  roots  and  herbs,  with  a  sheepskin  for  clothing, 
and  a  wigwam  for  lodging ;  yet,  in  the  present  state  of  European 
society,  we  cannot  look  upon  bread  or  butcher's  meat,  woollen- 
clothes  or  houses  of  masonry,  as  luxuries.  For  the  same  reason, 
the  line  varies  also  according  to  the  varying  circumstances  of  indi- 
vidual fortune ;  what  is  a  necessary  in  a  large  town,  or  in  a  particu- 
lar line  of  life,  may,  in  another  line  of  life,  or  in  the  country,  be  a 
mere  superfluity.  Wherefore,  it  is  impossible  exactly  to  define  the 
boundary  between  the  one  and  the  other.  Smith  has  fixed  it  a  little 
in  advance  of  Stewart;  including  in  the  rank  of  necessaries,  besides 
natural  wants,  such  as  the  established  rules  of  decency  and  propriety 
have  made  necessary  in  the  lower  classes  of  society.  But  Smith 
was  wrong  in  attempting  to  fix  at  all  what  must,  in  the  nature  of 
things,  be  ever  varying. 

Luxury  may  be  said,  in  a  general  way,  to  be,  the  use  or  consump- 

poultry  were  lost  in  consequence.  One  day  a  fine  young  porker  made  his  es- 
cape into  the  woods,  and  the  whole  family,  gardener,  cook,  milk-maid,  &c.,  pre- 
sently turned  out  in  quest  of  the  fugitive.  The  gardener  was  the  first  to  dis- 
cover the  object  of  pursuit,  and  in  leaping  a  ditch  to  cut  off  his  further  escape, 
got  a  sprain  that  confined  him  to  his  bed  for  the  next  fortnight :  the  cook  found 
the  linen  burnt  that  she  had  left  hung  up  before  the  fire  to  dry;  and  the  milk- 
maid, having  forgotten  in  her  haste  to  tie  up  the  cattle  properly  in  the  cow-house, 
one  of  the  loose  cows  had  broken  the  leg  of  a  colt  that  happened  to  be  kept  in 
the  same  shed.  The  linen  burnt  and  4,he  gardener's  work  lost,  were  worth  lull 
twenty  crowns ;  and  the  colt  about  as  much  more :  so  that  here  was  a  loss  in  a 
few  minutes  of  forty  crowns,  purely  for  want  of  a  latch  that  might  have  cost  a 
few  sous  at  the  utmost ;  and  this  in  a  household  where  the  strictest  economy  was 
necessary,  to  say  nothing  of  the  suffering  of  the  poor  man,  or  the  anxiety  and 
other  troublesome  incidents.  The  misfortune  was  to  be  sure  not  very  serious, 
nor  the  loss  very  heavy ;  yet  when  it  is  considered,  that  similar  neglect  was  the 
occasion  of  repeated  disasters  of  the  same  kind,  and  ultimately  of  the  ruin  of  a 
worthy  family,  it  was  deserving  of  some  little  attention. 

*  Stewart,  Essay  on  Pol.  Econ.  book  ii.  c.  20.  The  same  writer  lias  in  an 
other  passage  observed,  that  every  thing  not  absolutely  necessary  to  tare  exisl- 
euce  is  a  superfluity. 


406  ON  CONSUMPTION.  BOOK  IIL 

tion  of  dear  articles ;  for  the  term  dear  is  one  of  relation,  and  there- 
lore  may  be  properly  enough  applied  in  the  definition  of  another 
term,  whose  sense  is  likewise  relative.  Luxury*  with  us  in  France 
conveys  the  idea  rather  of  ostentation  than  of  sensuality;  applied  to 
dress/it  denotes  rather  the  superior  beauty  and  impression  upon  the 
beholder,  than  superior  convenience  and  comfort  to  the  wearer;  ap- 
plied to  the  table,  it  means  rather  the  splendour  of  a  sumptuous  ban- 
quet, than  the  exquisite  farce  of  the  solitary  epicure.  The  grand  aim 
of  luxury  in  this  sense  is  to  attract  admiration  by  the  rarity,  the  cost- 
liness, and  the  magnificence  of  the  objects  displayed,  recommended 
probably  neither  by  utility,  noi  convenience,  nor  pleasurable  quali- 
ties, but  merely  by  their  dazzling  exterior  and  effect  upon  the  opinions 
of  mankind  at  large.  Luxury  conveys  the  idea  of  ostentation ;  but 
ostentation  has  itself  a  far  more  extensive  meaning,  and  comprehends 
every  quality  assumed  for  the  purpose  of  display.  A  man  may  be 
ostentatiously  virtuous,  but  is  never  luxuriously  so ;  for  luxury  im 
plies  expense.  Thus,  luxury  of  wit  or  genius  is  a  metaphorical 
expression,  implying  a  profuse  display  or  expenditure,  if  it  may  be 
so  called,  of  those  qualities  of  the  intellect,  which  it  is  the  character- 
istic of  good  taste  to  deal  out  with  a  sparing  hand. 

Although,  with  us  in  France,  what  we  term  luxury  is  chiefly 
directed  to  ostentatious  indulgence,  the  excess  and  refinement  of  sen- 
suality are  equally  unjustifiable,  and  of  precisely  similar  effect :  that 
is  to  say,  of  a  frivolous  and  inconsiderable  enjoyment  or  satisfaction", 
obtained  by  a  large  consumption,  calculated  to  satisfy  more  urgent 
and  extensive  wants.  But  I  should  not  stigmatise  as  luxury  that 
degree  of  variety  or  abundance,  which  a  prudent  and  well-informed 
person  in  a  civilised  community  would  like  to  see  upon  his  table 
upon  domestic  and  common  occasions,  or  aim  at  in  his  dress  and 
abode,  when  under  no  compulsion  to  keep  up  an  appearance.  I  should 
call  this  degree  of  indulgence  judicious  and  suitable  to  his  condition, 
but  not  an  instance  of  luxury. 

Having  thus  defined  the  term  luxury,  we  may  go  on  to  investigate 
its  effect  upon  the  well-ordering  or  economy  of  nations. 

Under  the  head  of  unproductive  consumption  is  comprised  the 
satisfaction  of  many  actual  and  urgent  wants,  which  is  a  purpose  of 
sufficient  consequence  to  outweigh  the  mischief,  that  must  ensue 
from  the  destruction  of  values.  But  what  is  there  to  compensate 
that  mischief,  wrhere  such  consumption  has  not  for  its  object  the  satis- 
faction of  such  wants  1  where  money  is  spent  for  the  mere  sake  of 
spending,  and  the  value  destroyed  without  any  object  beyond  its 
destruction  ? 

It  is  supposed  to  be  beneficial,  at  all  events,  to  the  producers  of 
the  articles  consumed.  But  it  is  to  be  considered,  that  the  same 
expenditure  must  take  place,  though  not,  perhaps,  upon  objects  quite 

*  The  English  term  luxury  has  a  much  more  sensual  meaning  than  the  French 
luxe,  and  seems  to  comprise  both  luxe  and  luxure,  the  luxus,  or  luxuria,  and 
luxuries  of  the  Latin  writers. 


CHAP.  V.  ON  CONSUMPTION.  407 

so  frivolous;  for  the  money  withheld  from  luxurious  indulgences 
is  not  absolutely  thrown  into  the  sea ;  it  is  sure  to  be  spent  either 
upon  more  judicious  gratifications  or  upon  reproduction.  In  one 
way  or  other,  all  the  revenue,  not  absolutely  sunk  or  buried,  is  con- 
sumed by  the  receiver  of  it,  or  by  some  one  in  his  stead ;  and  in  all 
cases  whatever,  the  encouragement  held  out  by  consumption  to  the 
producer  is  co-extensive  with  the  total  amount  of  revenue  to  be  ex- 
pended. Whence  it  follows : 

1.  That   the   encouragement   which   ostentatious   extravagance 
affords  to  one  class  of  production  is  necessarily  withdrawn  from 
another. 

2.  That  the  encouragement  resulting  from  this  kind  of  consump- 
tion cannot  increase,  except  in  the  event  of  an  increase  in  the  reve- 
nue of  the  consumers :  which  revenue,  as  we  can  not  but  know  by 
this  time,  is  not  to  be  increased  by  luxurious,  but  solely  by  repro- 
ductive consumption. 

How  great,  then,  must  be  the  mistake  of  those,  who,  on  observing 
the  obvious  fact,  that  the  production  always  equals  the  consumption, 
as  it  must  necessarily  do,  since  a  thing  can  not  be  consumed  before 
it  is  produced,  have  confounded  the  cause  with  the  effect,  and  laid  it 
down  as  a  maxim,  that  consumption  originates  production ;  there- 
fore that  frugality  is  directly  adverse  to  public  prosperity,  and  that 
the  most  useful  citizen  is  the  one  who  spends  the  most. 

The  partisans  of  the  two  opposite  systems  above  adverted  to,  the 
economists,  and  the  advocates  of  exclusive  commerce,  or  the  balance 
of  trade,  have  made  this  maxim  a  fundamental  article  of  their  creed. 
The  merchants  and  manufacturers,  who  seldom  look  beyond  the 
actual  sale  of  their  products,  or  inquire  into  the  causes  which  may 
operate  to  extend  their  sale,  have  warmly  supported  a  position,  ap- 
parently so  consistent  with  their  interests ;  the  poets,  who  are  ever 
apt  to  be  seduced  by  appearances,  and  do  not  consider  themselves 
bound  to  be  wiser  than  politicians  and  men  of  business,  have  been 
loud  in  the  praise  of  luxury;*  and  the  rich  have  not  been  backward 

*  Though  it  is  not  every  subject  that  allows  equal  scope  to  poetical  genius,  it 
does  not  seem,  that  error  affords  a  finer  field  than  truth.  The  lines  of  Voltaire 
on  the  system  of  the  world,  and  on  the  discoveries  of  Newton  regarding  the 
properties  of  light,  are  strictly  conformable  to  the  rules  of  science,  and  nowise 
inferior  in  beauty  to  those  of  Lucretius  on  the  fanciful  dogmas  of  the  Epicurean 
school.  But  if  Voltaire  had  been  better  acquainted  with  the  principles  of  poli- 
tical economy,  he  would  never  have  given  utterance  to  such  sentiments  as  the 
following : 

Sachez  surtout  que  le  luxe  enrichit 

IJn  grand  etat,  s'il  en  perd  un  petit. 

Cette  splendeur,  cette  pompe  mondaine, 

D'un  regne  heureux  est  la  marque  certain. 

Le  riche  est  ne  pour  beaucoup  depenser    .... 

The  progress  of  science  compels  those  who  covet  literary  fame,  to  make 
themselves  acquainted  with  general  principles  at  the  least ;  without  a  close  ad- 
herence to  truth  and  nature,  there  is  little  chance  of  permanent  reputation,  even 
iii  the  poetical  department. 


408  ON  CONSUMPTION.  BOOK  111. 

in  adopting  principles,  that  exalt  their  ostentation  into  a  virtue,  ana 
tneir  self-gratification  into  benevolence.* 

This  prejudice,  however,  must  vanish  as  the  increasing  knowledge 
of  political  economy  begins  to  reveal  the  real  sources  of  wealth,  the 
means  of  production,  and  the  effect  of  consumption.  Vanity  may 
take  pride  in  idle  expense,  but  will  ever  be  held  in  no  less  contempt 
by  the  wise,  on  account  of  its  pernicious  effects,  than  it  has  been  all 
along,  for  the  motives  by  which  it  is  actuated. 

These  conclusions  of  theory  have  been  confirmed  by  experience. 
Misery  is  the  inseparable  companion  of  luxury.  The  man  of  wealth 
and  ostentation  squanders  upon  costly  trinkets,  sumptuous  repasts, 
magnificent  mansions,  dogs,  horses,  arid  mistresses,  a  portion  of 
value,  which,  vested  in  productive  occupation,  would  enable  a  mul- 
titude of  willing  labourers,  whom  his  extravagance  now  consigns  to 
idleness  and  misery,  to  provide  themselves  with  warm  clothing 
nourishing  food,  and  household  conveniences.  The  gold  buckle? 
of  the  rich  man  leave  the  poor  one  without  shoes  to  his  feet ;  and 
the  labourer  will  want  a  shirt  to  his  back,  while  his  rich  neighbour 
glitters  in  velvet  and  embroidery. 

It  is  vain  to  resist  the  nature  of  things.  Magnificence  may  do 
what  it  will  to  keep  poverty  out  of  sight,  yet  it  will  cross  it  at  every 
urn,  still  haunting,  as  if  to  reproach  it  for  its  excesses.  This  con- 
j-ast  was  to  be  met  with  at  Versailles,  at  Rome,  at  Madrid,  and  in 
every  seat  of  royal  residence.  In  a  recent  instance,  it  occurred  in 
France  in  an  afflicting  degree,  after  a  long  series  of  extravagant  and 
ostentatious  administration;  yet  the  principle  is  so  undeniable,  that 
one  would  not  suppose  it  had  required  so  terrible  an  illustration.! 

*  La  Republique  a  bien  affaire 
De  Gens,  qui  ne  dependent  rien>; 
Je  ne  sais  d'homme  necessaire, 
Que  celui  dont  le  luxe  epand  beaucoup  de  bien. 

La  Fontaine,  Avantage  de  la  Science. 

"  Were  the  rich  not  to  spend  their  money  freely,"  says  Montesquieu,  "  the 
poor  would  starve."  Esprit  des  Lois,  liv.  vii.  c.  4. 

f  There  are  other  circumstances  that  contribute  to  veil  the  residence  of  the 
court  in  an  atmosphere  of  human  misery.  It  is  there,  that  personal  service  is 
consumed  by  wholesale;  and  that  is  of  all  things  the  most  rapidly  consumed, 
being,  indeed,  consumed  as  fast  as  produced.  Under  this  denomination,  is  to  be 
comprised,  the  agency  of  the  soldiery,  of  menial  servants,  of  public  function- 
aries, whether  useful  or  not,  of  clerks,  lawyers,  judges,  civilians,  ecclesiastics, 
actors,  musicians,  drolls,  and  numerous  other  hangers-on,  who  all  crowd  towards 
the  focus  of  power  and  occupation,  civil,  judicial,  military,  or  religious.  It  is 
there  also,  that  material  products  seem  to  be  more  wantonly  consumed.  The 
choicest  viands,  the  most  beautiful  and  costly  stuffs,  the  rarest  works  of  art  and 
fashion,  all  seem  emulous  to  reach  this  general  sink,  whence  little  or  nothing 
ever  emerges. 

Yet,  if  the  accumulated  values,  that  are  drained  from  every  quarter  of  the 
national  territory  to  feed  the  consumption  of  the  seat  of  royalty,  were  distributed 
with  any  regard  to  equity,  they  would  probably  suffice  to  maintain  all  classes  in 
comfort  and  plenty.  Though  such  drains  must  always  be  calamitous,  because 
they  absorb  value,  and  yield  no  return,  at  any  rate  the  local  population  might  be 
pretty  well  off;  but  it  is  notorious  that  wealth  is  nowhere  less  equally  diffused. 


CHAP.  V.  ON  CONSUMPTION.  409 

Those  who  are  little  in  the  habit  of  looking  through  the  appear- 
ance to  the  reality  of  things,  are  apt  to  be  seduced  by  the  glitter  and 
the  bustle  of  ostentatious  luxury.  They  take  the  display  of  con- 
sumption as  conclusive  evidence  of  national  prosperity.  If  they 
could  open  their  eyes,  they  would  see,  that  a  nation  verging  to- 
wards decline  will  for  some  time  continue  to  preserve  a  show  of 
opulence ;  like  the  establishment  of  a  spendthrift  on  the  high  road 
to  ruin.  But  this  false  glare  can  not  last  long;  the  effort  dries  up 
the  sources  of  reproduction,  and,  therefore,  must  infallibly  be  fol- 
lowed by  a  state  of  apathy  and  exhaustion  of  the  political  frame, 
which  is  only  to  be  remedied  by  slow  degrees,  and  by  the  adoption 
of  a  regimen  the  very  reverse  of  that,  by  which  it  has  thus  been 
reduced. 

It  is  distressing  to  see  the  fatal  habits  and  customs  of  the  nation 
one  is  attached  to  by  birth,  fortune,  and  social  affection,  extending 
their  influence  over  the  wisest  individuals,  and  those  best  able  to 
appreciate  this  danger  and  foresee  its  disastrous  consequences.  The 
number  of  persons,  who  have  sufficient  spirit  and  independence  of 
fortune  to  act  up  to  their  principles,  and  set  themselves  forward  as 
an  example,  is  extremely  small.  Most  men  yield  to  the  torrent,  ana 
rush  on  ruin  with  their  eyes  open,  in  search  of  happiness;  although 
it  requires  a  very  small  share  of  philosophy  to  see  the  madness  of 
this  course,  and  to  perceive,  that,  when  once  the  common  wants  of 
nature  are  satisfied,  happiness  is  to  be  found,  not  in  the  frivolous 
enjoyments  of  luxurious  vanity,  but  in  the  moderate  exercise  of  our 
physical  and  moral  faculties. 

Wherefore,  those,  who  abuse  great  power,  or  talent,  by  exerting 
it  in  diffusing  a  taste  for  luxury,  are  the  worst  enemies  of  social  hap- 
piness. If  there  is  one  habit,  that  deserves  more  encouragement 
than  another,  in  monarchies  as  well  as  republics,  in  great  as  well  as 
small,  it  is  this  of  economy.  Yet,  after  all,  no  encouragement  is 
wanted ;  it  is  quite  enough  to  withdraw  favour  and  honour  from 
habits  of  profusion;  to  afford  inviolable  security  to  all  savings  and 
acquirements;  to  give  perfect  freedom  to  their  investment  and  occu- 
pation in  every  branch  of  industry,  that  is  not  absolutely  criminal. 

It  is  alleged,  that,  to  excite  mankind  to  spend  or  consume,  is  to 
excite  them  to  produce,  inasmuch  as  they  can  only  spend  what  they 
may  acquire.  This  fallacy  is  grounded  on  the  assumption,  that 
production  is  equally  within  the  ability  of  mankind  as  consumption ; 
that  it  is  as  easy  to  augment  as  to  expend  one's  revenue.  But,  sup 
posing  it  were  so,  nay  further,  that  the  desire  to  spend,  begets  a 

The  prince,  the  favourite,  a  mistress,  or  a  bloated  peculator,  takes  the  lion'3 
share,  leaving  to  the  subordinate  drones  the  pittance  assigned  to  them  by  the 
generosity  or  caprice  of  their  superiors. 

The  residence  of  an  overgrown  proprietor  upon  his  estate  then  only  tends  to 
diffuse  abundance  and  cheerfulness  around  him,  when  his  expenditure  is  directed 
to  objects  of  utility,  rather  than  of  pomp;  in  which  case  he  is  really  an  adven- 
turer in  agriculture,  and  an  accumulator  of  capital  in  the  shape  of  iniprovemenw 
and  ameliorations. 

35  3B 


410  ON  CONSUMPTION.  BOOK  IIL 

liking  for  labour,  although  experience  by  no  means  warrants  such  a 
conclusion,  yet  there  can  be  no  enlargement  of  production,  without 
an  augmentation  of  capital,  which  is  one  of  the  necessary  elements 
of  production;  but  it  is  clear,  that  capital  can  only  be  accumulated 
by  frugality;  and  how  can  that  be  expected  from  those,  whose  only 
stimulus  to  production  is  the  desire  of  enjoyment. 

Moreover,  when  the  desire  of  acquirement  is  stimulated  by  the 
love  of  display,  how  can  the  slow  and  limited  progress  of  real  pro- 
duction keep  pace  with  the  ardour  of  that  motive  ?  Will  it  not  find  a 
shorter  road  to  its  object,  in  the  rapid  and  disreputable  profits  of 
jobbing  and  intrigue,  classes  of  industry  most  fatal  to  national  wel- 
fare, because  they  produce  nothing  themselves,  but  only  aim  at 
appropriating  a  share  of  the  produce  of  other  people?  It  is  this 
motive,  that  sets  in  motion  the  despicable  art  and  cunning  of  the 
knave,  leads  the  pettifogger  to  speculate  on  the  obscurity  of  the 
laws,  and  the  man  of  authority  to  sell  to  folly  and  wickedness  that 
patronage  which  it  is  his  duty  to  dispense  gratuitously  to  merit  and 
to  right.  Pliny  mentions  having  seen  Paulina  at  a  supper,  dressed  in 
a  network  of  pearls  and  emeralds,  that  cost  40  millions  of  sestertii,  (1) 
as  she  was  ready  to  prove  by  her  jeweller's  bills.  It  was  bought 
with  the  fruit  of  her  ancestor's  speculations.  "  Thus,"  says  the 
Roman  writer,  "  it  was  to  dress  out  his  grand-daughter  in  jewels  at 
an  entertainment,  that  Lollius  forgot  himself  so  far,  as  to  lay  waste 
whole  provinces,  to  become  the  object  of  detestation  to  the  Asiatics 
he  governed,  to  forfeit  the  favour  of  Caesar,  and  end  his  life  by 
poison." 

This  is  the  kind  of  industry  generated  by  love  of  display. 

If  it  be  pretended,  that  a  system,  which  encourages  profusion, 
operates  only  upon  the  wealthy,  and  thus  tends  to  a  beneficial  end, 
inasmuch  as  it  reduces  the  evil  of  the  inequality  of  fortune,  there 
can  be  little  difficulty  in  showing,  that  profusion  in  the  higher,  begets 
a  similar  spirit  in  the  middling  and  low;er  classes  of  society,  which 
last  must,  of  course,  the  soonest  arrive  at  the  limits  of  their  income; 
so  that,  in  fact,  the  universal  profusion  has  the  effect  of  increasing, 
instead  of  reducing,  that  inequality.  Besides,  the  profusion  of  the 
wealthier  class  is  always  preceded,  or  followed,  by  that  of  the  govern- 
ment, which  must  be  fed  and  supplied  by  taxation,  that  is  always 
sure  to  fall  more  heavily  upon  small  incomes  than  on  large  ones.* 

*  In  favour  of  luxury,  the  followi  ig  paradoxical  argument  has  been  advanced ; 
for  what  is  too  ridiculous  to  be  hazarded  in  sucfi  a  cause  ]  "  That  since  luxury 
consumes  superfluities  only,  the  objects  it  destroys  are  of  little  real  utility,  and 
therefore  the  loss  to  society  can  be  but  small."  There  is  this  ready  answer:  the 
value  of  the  objects  consumed  by  luxury  must  have  been  reduced  by  the  compe- 
tition of  producers  to  a  level  with  the  charges  of  production,  wherein  are  com- 
prised the  profits  of  the  producers.  Objects  of  luxury  are  equally  the  product 
of  land,  capital,  and  industry,  which  might  have  been  employed  in  raising  objects 
of  real  utility,  had  the  demand  taken  that  direction  ;  for  production  invariably 
accommodates  itself  to  the  taste  of  the  consumers. 

(t)  [About  140,000  dollars.     Some  English  ladies  wear  jewels  of  greatei 


CHAP.  V.  ON  CONSUMPTION.  411 

The  apologists  of  luxury  have  sometimes  gone  so  far  as  to  cry  up 
the  advantages  of  misery  and  indigence ;  on  the  ground,  that,  without 
the  stimulus  of  want,  the  lower  classes  of  mankind  could  never  be 
impelled  to  labour,  so  that  neither  the  upper  classes,  nor  society  at 
large,  could  have  the  benefit  of  their  exertions. 

Happily,  this  position  is  as  false  in  principle  as  it  would  be  cruel 
in  practice.  Were  nakedness  a  sufficient  motive  of  exertion,  the 
savage  would  be  the  most  diligent  and  laborious,  for  he  is  the  nearest 
to  nakedness,  of  his  species.  Yet  his  indolence  is  equally  notorious 
and  incurable.  Savages  will  often  fret  themselves  to  death,  if  com- 
pelled to  work.  It  is  observable  throughout  Europe,  that  the  laziest 
nations  are  those  nearest  approaching  to  the  savage  state;  a  mechanic 
in  good  circumstances,  at  London  or  Paris,  would  execute  twice  as 
much  work  in  a  given  time,  as  the  rude  mechanic  of  a  poor  district. 
Wants  multiply  as  fast  as  they  are  satisfied ;  a  man  who  has  a  jacket 
is  for  having  a  coat ;  and,  when  he  has  his  coat,  he  must  have  a  great- 
coat too.  The  artisan,  that  is  lodged  in  an  apartment  by  himself, 
extends  his  views  to  a  second ;  if  he  has  two  shirts,  he  soon  wants  a 
dozen,  for  the  comforts  of  more  frequent  change  of  linen ;  whereas, 
if  he  has  none  at  all,  he  never  feels  the  want  of  it.  No  man  feels 
any  disinclination  to  make  a  further  acquisition,  in  consequence  of 
having  made  one  already. 

The  comforts  of  the  lower  classes  are,  therefore,  by  no  means  in- 
compatible with  the  existence  of  society,  as  too  many  have  main- 
tained. The  shoemaker  will  make  quite  as  good  shoes  in  a  warm 
room,  with  a  good  coat  to  his  back,  and  wholesome  food  for  himself 
and  his  family,  as  when  perishing  with  cold  in  an  open  stall ;  he  is 
not  less  skilful  or  inclined  to  work,  because  he  has  the  reasonable 
conveniences  of  life.  Linen  is  washed  as  well  in  England,  where 
washing  is  carried  on  comfortably  within  doors,  as  where  it  is  exe- 
cuted in  the  nearest  stream  in  the  neighbourhood. 

It  is  time  for  the  rich  to  abandon  the  puerile  apprehension  of  losing 
the  objects  of  their  sensuality,  if  the  poor  man's  comforts  be  pro- 
moted. On  the  contrary,  reason  and  experience  concur  in  teaching, 
that  the  greatest  variety,  abundance,  and  refinement  of  enjoyment 
are  to  be  found  in  those  countries,  where  wealth  abounds  most,  and 
is  the  most  widely  diffused. 

value ;  but  some  read  the  passage  in  Pliny  Quadringenties,  instead  of  Quad* 
ragies  Sestertium,  This  would  make  the  jewels  of  Paulina  worth  1,400,000 
dollars ;  the  more  probable  sum.]  AMERICAN  EDITOR. 


412  ON  CONSUMPTION.  BOOK  III 

CHAPTER  VI. 

ON   PUBLIC   CONSUMPTIOV 

SECTION  I. 
Of  the  Nature  and  general  Effect  of  Public  Consumption. 

BESIDES  the  wants  of  individuals  and  of  families  which  it  is  the 
object  of  private  consumption  to  satisfy,  the  collection  of  many  indi- 
viduals into  a  community  gives  rise  to  a  new  class  of  wants,  the 
wants  of  the  society  in  its  aggregate  capacity,  the  satisfaction  of 
which  is  the  object  of  public  consumption.  The  public  buys  and 
consumes  the  personal  service  of  the  minister,  that  directs  its  affairs, 
the  soldier,  that  protects  it  from  external  violence,  the  civil  or  crimi- 
nal judge,  that  protects  the  rights  and  interests  of  each  member 
against  the  aggression  of  the  rest.  All  these  different  vocations  have 
their  use,  although  they  may  often  be  unnecessarily  multiplied  or 
overpaid;  but  that  arises  from  a  defective  political  organization, 
which  it  does  not  fall  within  the  scope  of  this  work  to  investigate. 

We  shall  see  presently  whence  it  is,  that  the  public  derives  all  the 
values,  wherewith  it  purchases  the  services  of  its  agents,  as  well  as 
the  articles  its  wants  require.  All  we  have  to  consider  in  this  chap- 
ter is,  the  mode  in  which  its  consumption  is  effected,  and  the  conse- 
quences resulting  from  it. 

If  I  have  made  myself  understood  in  the  commencement  of  this 
third  book,  my  readers  will  have  no  difficulty  in  comprehending,  that 
public  consumption,  or  that  which  takes  place  for  the  general  utility 
of  the  whole  community,  is  precisely  analogous  to  that  consumption, 
which  goes  to  satisfy  the  wants  of  individuals  or  families.  In  either 
case,  there  is  a  destruction  of  values,  and  a  loss  of  wealth ;  although, 
perhaps,  not  a  shilling  of  specie  goes  out  of  the  country. 

By  way  of  insuring  conviction  of  the  truth  of  this  position,  let  us 
trace  from  first  to  last  the  passage  of  a  product  towards  ultimate 
consumption  on  the  public  account. 

The  government  exacts  from  a  tax-payer  the  payment  of  a  given 
tax  in  the  shape  of  money.  To  meet  this  demand,  the  tax-payer 
exchanges  part  of  the  products  at  his  disposal  for  coin,  which  he 
pays  to  the  tax-gatherer:*  a  second  set  of  government  agents  is 


*  Although  the  capitalist  and  landholder  receive  their  interest  and  rent  origi- 
nally in  the  shape  of  money,  and  have,  therefore,  no  occasion  to  go  through  any 
previous  act  of  exchange,  to  obtain  wherewithal  to  pay  the  tax,  yet  such  a  pre- 
vious exchange  must  have  been  effected  by  the  adventurer,  who  turns  the  land 
or  capital  to  account.  The  effect  is  precisely  the  same,  as  if  the  rent  or  interest 
had  been  paid  in  kind ;  that  is,  in  the  immediate  products  of  the  land  or  capital ; 
and  the  landholder  or  capitalist  had  paid  the  tax  either  by  the  direct  transfer  of 


CHAP.  VI.  ON  CONSUMPTION.  413 

busied  in  buying  with  that  coin,  cloth  and  other  necessaries  for 
the  soldiery.  Up  to  this  point,  there  is  no  value  lost  or  consumed : 
there  has  only  been  a  gratuitous  transfer  of  value,  and  a  subsequent 
act  of  barter :  but  the  value  contributed  by  the  subject  still  exists  in 
the  shape  of  stores  and  supplies  in  the  military  depot.  In  the  end, 
however,  this  value  is  consumed ;  and  then  the  portion  of  wealth, 
which  passes  from  the  hands  of  the  tax-payer  into  those  of  the  tax- 
gatherer,  is  destroyed  and  annihilated. 

Yet  it  is  not  the  sum  of  money  that  is  destroyed :  that  has  only 
passed  from  one  hand  to  another,  either  without  any  return,  as  when 
it  passed  from  the  tax-payer  to  the  tax-gatherer ;  or  in  exchange  for 
an  equivalent,  as  when  it  passed  from  the  government  agent  to  the 
contractor  for  clothing  and  supplies.  The  value  of  the  money  sur- 
vives the  whole  operation,  and  goes  through  three,  four,  or  a  dozen 
hands,  without  any  sensible  alteration ;  it  is  the  value  of  the  clothing 
and  necessaries  that  disappears,  with  precisely  the  same  effect,  as  if 
the  tax-payer  had,  with  the  same  money,  purchased  clothing  and 
necessaries  for  his  own  private  consumption.  The  sole  difference 
is,  that  the  individual  in  the  one  case,  and  the  state  in  the  other 
enjoys  the  satisfaction  resulting  from  that  consumption. 

The  same  reasoning  may  be  easily  applied  to  all  other  kinds  of 
public  consumption.  When  the  money  of  the  tax-payer  goes  to 
pay  the  salary  of  a  public  officer,  that  officer  sells  his  time,  his  tal- 
ents, and  his  exertions,  to  the  public,  all  of  which  are  consumed  for 
public  purposes.  On  the  other  hand,  that  officer  consumes,  instead 
of  the  tax-payer,  the  value  he  receives  in  lieu  of  his  services ;  in 
the  same  manner  as  any  clerk  or  person  in  the  private  employ  of 
the  tax-payer  would  do. 

There  has  been  long  a  prevalent  notion,  that  the  values,  paid  by 
the  community  for  the  public  service,  return  to  it  again  in  some 
shape  or  other;  in  the  vulgar  phrase,  that  what  government  and  its 
agents  receive,  is  refunded  again  by  their  expenditure.  This  is  a 
gross  fallacy;  but  one  that  has  been  productive  of  infinite  mis 
chief,  inasmuch  as  it  has  been  the  pretext  for  a  great  deal  of  shame- 
less waste  and  dilapidation.  The  value  paid  to  government  by  the 
tax-payer  is  given  without  equivalent  or  return:  it  is  expended  by 
the  government  in  the  purchase  of  personal  service,  of  objects  of 
consumption;  in  one  word,  of  products  of  equivalent  value,  which 
are  actually  transferred.  Purchase  or  exchange  is  a  very  different 
thing  from  restitution.* 

part  of  those  products,  or  by  first  selling  them,  and  afterwards  paying  over  the 
proceeds.  On  this  subject,  vide  supra,  Book  II.  chap.  5,  for  the  mode  in  which 
revenue  is  distributed  amongst  the  community. 

*  Dr.  Hamilton,  in  his  valuable  tract  upon  The  National  Debt  of  Great  Bri- 
tain, illustrates  the  absurdity  of  the  position  here  attacked,  by  comparing  it  to 
the  "  forcible  entry  of  a  robber  into  a  merchant's  house,  who  should  take  away 
his  money,  and  tejl  him  he  did  him  no  injury,  for  the  money,  or  part  of  it,  would 
be  employed  in  purchasing  the  commodities  he  dealt  in,  upon  which  he  would 
receive  a  profit."  The  encouragement  afforded  by  the  public  expenditure  is  ore 
ciselv  analogous. 
"35* 


414  ON  CONSUMPTION.  BOOK  III. 

Turn  it  which  way  you  will,  this  operation,  though  often  very 
complex  in  the  execution,  must  always  be  reducible  by  analysis  to 
this  plain  statement.  A  product  consumed  must  always  be  a  pro- 
duct lost,  be  the  consumer  who  he  may ;  lost  without  return,  when- 
ever no  value  or  advantage  is  received  in  return ;  but,  to  the  tax- 
payer,  the  advantage  derived  from  the  services  of  the  public  func 
tionary,  or  from  the  consumption  effected  in  the  prosecution  oi 
public  objects,  is  a  positive  return. 

If,  then,  public  and  private  expenditure  affect  social  wealth  in 
the  same  manner,  the  principles  of  economy,  by  which  it  should  be 
regulated,  must  be  the  same  in  both  cases.  There  are  not  two  kinds 
of  economy,  any  more  than  two  kinds  of  honesty,  or  of  morality.  If 
a  government  or  an  individual  consume  in  such  a  way,  as  to  give 
birth  to  a  product  larger  than  that  consumed,  a  successful  effort  of 
productive  industry  will  be  made.  If  no  product  result  from  the 
act  of  consumption,  there  is  a  loss  of  value,  whether  to  the  state  or 
to  the  individual ;  yet,  probably,  that  loss  of  value  may  have  been 
productive  of  all  the  good  anticipated.  Military  stores  and  sup- 
plies, and  the  time  and  labour  of  civil  and  military  functionaries, 
engaged  in  the  effectual  defence  of  the  state,  are  well  bestowed, 
though  consumed  and  annihilated ;  it  is  the  same  with  them,  as  with 
the  commodities  and  personal  service,  that  have  been  consumed  in 
a  private  establishment.  The  sole  benefit  resulting  in  the  latter  case 
is,  the  satisfaction  of  a  want;  if  the  want  had  no  existence,  the 
expense  or  consumption  is  a  positive  mischief,  incurred  without  an 
object.  So  likewise  of  the  public  consumption ;  consumption  for 
the  mere  purpose  of  consumption,  systematic  profusion,  the  creation 
of  an  office  for  the  sole  purpose  of  giving  a  salary,  the  destruction 
of  an  article  for  the  mere  pleasure  of  paying  for  it,  are  acts  ot 
extravagance  either  in  a  government  or  an  individual,  in  a  small 
state  or  a  large  one,  a  republic  or  a  monarchy.  Nay,  there  is  more 
criminality  in  public,  than  in  private  extravagance  and  profusion; 
inasmuch  as  the  individual  squanders  only  what  belongs  to  him ; 
but  the  government  has  nothing  of  its  own  to  squander,  being,  in 
fact,  a  mere  trustee  of  the  public  treasure.* 

What,  then,  are  we  to  think  of  the  principles  laid  down  by  those 
writers,  who  have  laboured  to  draw  an  essential  distinction  between 
public  and  private  wealth;  to  show,  that  economy  is  the  way  to 
increase  private  fortune,  but,  on  the  contrary,  that  public  wealth 
increases  with  the  increase  of  public  consumption :  inferring  thence 
this  false  and  dangerous  conclusion,  that  the  rules  of  conduct  in  the 
management  of  private  fortune  and  of  public  treasure,  are  not  only 
different,  but  in  direct  opposition  ? 

If  such  principles  were  to  be  found  only  in  books,  and  had  never 
ciept  into  practice,  one  might  suffer  them  without  care  or  regret  to 

*  It  is  mere  usurpation  in  a  government,  to  pretend  to  a  right  over  the  property 
ot  individuals,  or  to  act  as  if  possessing  such  a  right;  and  usurpation  can  never 
constitute  right;  although  it  may  confer  possession.  Were  it  otherwise,  a  thief, 
who  had  once,  by  force  or  fraud,  obtained  possession  of  another  man's  property, 
could  never  be  called  upon  to  make  restitution,  when  overpowered  and  taken 
prisoner,  for  he  might  set  up  the  plea  of  legitimate  ownership. 


CHAP  VL  ON  CONSUMPTION.  415 

swell  the  monstrous  heap  of  printed  absurdity;  but  it  must  excite 
our  compassion  and  indignation  to  hear  them  professed  by  men  of 
eminent  rank,  talents,  and  intelligence ;  and  still  more  to  see  them 
reduced  into  practice  by  the  agents  of  public  authority,  who  can 
enforce  error  and  absurdity  at  the  point  of  the  bayonet  or  mouth  of 
the  cannon.* 

Madame  de  Maintenon  mentions  in  a  letter  to  the  Cardinal  de 
Noailles,  that,  when  she  one  day  urged  Louis  XIV.  to  be  more 
liberal  in  charitable  donations,  he  replied,  that  royalty  dispenses 
charity  by  its  profuse  expenditure;  a  truly  alarming  dogma,  and  one 
that  shows  the  ruin  of  France  to  have  been  reduced  to  principle.! 
False  principles  are  more  fatal  than  even  intentional  misconduct ; 
because  they  are  followed  up  with  erroneous  notions  of  self-interest, 
and  are  long  persevered  in  without  remorse  or  reserve.  If  Louis 
XIV.  had  believed  his  extravagant  ostentation  to  have  been  a  mere 
gratification  of  his  personal  vanity,  and  his  conquests  the  satisfaction 
of  personal  ambition  alone,  his  good  sense  and  proper  feeling  would 
probably,  in  a  short  time,  have  made  it  a  matter  of  conscience  to 
desist,  or  at  any  rate,  he  would  have  stopped  short  for  his  own  sake ; 
but  he  was  firmly  persuaded,  that  his  prodigality  was  for  the  public 
good  as  well  as  his  own ;  so  that  nothing  coufd  stop  him,  but  mis- 
fortune and  humiliation-^ 

*  The  reader  will  readily  perceive,  that  this  and  many  other  passages,  were 
written  under  the  pressure  of  a  military  despotism,  which  had  assumed  the  ab- 
solute disposal  of  the  national  resources,  and  suffered  no  one  to  express  a  doubt 
of  the  justice  and  policy  of  its  acts. 

f  Fenelon,  Vauban,  and  a  very  few  more,  of  the  most  distinguished  talent,  had 
a  confused  idea  of  the  ruinous  tendency  of  this  system ;  but  they  failed  in  im- 
pressing the  rest  of  the  world  with  the  same  conviction;  for  want  of  just  notions 
on  the  subject  of  the  production  and  consumption  of  wealth.  Thus  Vauban,  in 
his  Dixme  royale,  says,  '  the  present  misery  of  France  is  attributable,  not  to  the 
rigour  of  the  climate,  the  character  of  the  inhabitants,  or  the  barrenness  of  the 
boil :  for  the  climate  is  most  favourable,  the  people  active,  diligent,  dexterous,  and 
numerous :  but  to  the  frequency  and  long  continuance  of  war,  and  the  ignorance 
and  neglect  of  economy.'  Fenelon  had  expressed  the  same  sentiments  in  seve- 
ral admirable  passages  of  his  Telemaque,  but  they  passed  for  mere  declamation, 
as  well  they  might ;  for  he  was  not  qualified  to  prove  their  truth  and  accuracy. 

I  When  Voltaire  tells  us,  speaking  of  the  superb  edifices  of  Louis  XIV.,  that 
they  were  by  no  means  burthensome  to  the  nation,  but  served  to  circulate  money 
in  the  community,  he  gives  a  decisive  proof  of  the  utter  ignorance  of  the  most 
celebrated  French  writers  of  his  day  upon  these  matters.  He  looked  no  further 
than  the  money  employed  on  the  occasion ;  and,  when  the  view  is  limited  to  that 
alone,  the  extreme  of  prodigality  exhibits  no  appearance  of  loss ;  for  money  is,  in 
fact,  an  item,  neither  of  revenue,  nor  of  annual  consumption.  But  a  little  closer 
attention  will  convince  us  of  the  fallacy  of  this  position,  which  would  lead  us  to 
the  absurd  inference,  that  no  consumption  whatever  has  occurred  within  the 
year,  whenever  the  amount  of  specie  at  the  end.  of  it  is  found  to  be  nowise  di- 
minished. The  vigilance  of  the  historian  should  have  traced  the  167  millions  of 
dollars  expended  on  the  chateau  of  Versailles  alone,  from  the  original  produc- 
tion by  the  laborious  efforts  of  the  productive  classes  of  the  nation,  to  the  first 
exchange  into  money,  wherewith  to  pay  the  taxes,  through  the  second  exchange 
into  building  materials,  painting,  gilding,  &c.  to  the  ultimate  consumption  in 
that  shape,  for  the  personal  gratification  of  the  vanity  of  the  monarch.  The 
money  acted  as  a  mere  means  of  facilitating  the  transfers  cf  value  in  the  course 


16  ON  CONSUMPTION.  BOOK  III. 

So  little  were  the  true  principles  of  political  economy  understood, 
even  by  men  of  the  greatest  science,  so  late  as  the  18th  century, 
that  Frederick  II.  of  Prussia,  with  all  his  anxiety  in  search  of  truth, 
nis  sagacity,  and  his  merit,  writes  thus  to  D'Alembert,  in  justifica- 
tion of  his  wars:  "My  numerous  armies  promote  the  circulation  of 
money,  and  disburse  impartially  amongst  the  provinces  the  taxes 
paid  by  the  people  to  the  state."  Again  I  repeat,  this  is  not  the  fact ; 
the  taxes  paid  to  the  government  by  the  subject  are  not  refunded 
oy  its  expenditure.  Whether  paid  in  money  or  in  kind,  they  are 
converted  into  provisions  and  supplies,  and  in  that  shape  consumed 
and  destroyed  by  persons,  that  never  can  replace  the  value,  because 
they  produce  no  value  whatever.*  It  was  well  for  Prussia  that 
Frederick  II.  did  not  square  his  conduct  to  his  principles.  The  good 
he  did  to  his  people,  by  the  economy  of  his  internal  administration, 
more  than  compensated  for  the  mischief  of  his  wars. 

Since  the  consumption  of  nations  or  the  governments  which  re- 
present them,  occasions  a  loss  of  value,  and  consequently,  of  wealth, 
it  is  only  so  far  justifiable,  as  there  results  from  it  some  national 
advantage,  equivalent  to  the  sacrifice  of  value.  The  whole  skill  of 
government,  therefore,  consists  in  the  continual  and  judicious  com- 
parison of  the  sacrifice  about  to  be  incurred,  with  the  expected 
benefit  to  the  community;  for  I  have  no  hesitation  in  pronouncing 
every  instance,  where  the  benefit  is  not  equivalent  to  the  loss,  to  be 
an  instance  of  folly,  or  of  criminality,  in  the  government. 

It  is  yet  more  monstrous,  then,  to  see  how  frequently  govern- 
ments, not  content  with  squandering  the  substance  of  the  peoplef 

of  the  transaction  ;  and  the  winding  up  of  the  account  will  show,  a  destruction  of 
value  to  the  amount  of  167  millions  of  dollars,  balanced  by  the  production  of  a 
palace,  in  need  of  constant  repair,  and  of  the  splendid  promenade  of  the  gardens. 

Even  land,  though  imperishable,  may  be  consumed  in  the  shape  of  the  value 
received  for  it.  It  has  been  asserted,  that  France  lost  nothing  by  the  sale  of  her 
national  domains  after  the  revolution,  because  they  were  all  sold  and  transferred 
to  French  subjects ;  but  what  became  of  the  capital  paid  in  the  shape  of  purchase- 
money,  when  it  left  the  pockets  of  the  purchasers  1  Was  it  not  consumed  and  lost  ? 

*Tn  the  execution  of  the  national  military  enterprise,  two  different  values  pass 
through  the  hands  of  the  government  or  its  agents,-  1.  The  value  paid  in  taxes  by 
the  public  at  large:  2.  The  value  received  in  supplies  and  services  from  the  par- 
ties affording  them.  For  the  first  of  these  no  return  whatever  is  made ;  for  tl.e 
second,  an  equivalent  is  paid  in  wages  or  purchase-money.  Wherefore,  there  it 
has  no  ground  for  saying  that  the  government  refunds  with  one  hand  what  is 
received  with  the  other ;  that  the  whole  transaction  is  a  mere  circulation  of  value, 
and  causes  no  loss  to  the  nation ;  for  the  government  returns  but  one,  where  it 
receives  two;  the  loss  of  the  other  half  falls  upon  the  community  at  largo. 
Thus,  the  national,  being  but  the  aggregate  of  individual  wealth,  is  diminished 
to  the  extent  of  the  total  consumption  of  the  government,  minus  the  product 
of  the  public  establishment ;  as  we  shall  presently  see  more  in  detail. 

tit  has  been  seen  in  the  concluding  chapter  of  Book  II.  that,  inasmuch  ag 
population  is  always  commensurate  with  production,  the  obstruction  of  the  pro. 
gres?siv«,  multiplication  of  products  is  a  preventive  check  to  the  further  multipli- 
cation of  the  human  race ;  and  that  the  waste  of  capital,  the  extinction  of  in- 
dustry, and  the  exhaustion  of  the  sources  of  production,  amount  to  positive  deci- 
mation of  th.^y  m  actual  existence.  A  wicked  or  ignorant  administration  may, 
in  this  way,  be  a  far  more  destructive  scourge,  than  war  with  all  its  atrocities. 


CHAP  VI.  ON  CONSUMPTION.  417 

in  folly  and  absurdity,  instead  of  aiming  at  any  return  of  value, 
actually  spend  that  substance  in  bringing  down  upon  the  nation 
calamities  innumerable;  practise  exactions  the  most  cruel  and  arbi- 
ti  ary,  to  forward  schemes  the  most  extravagant  and  wicked ;  first 
rifle  the  pockets  of  the  subject,  to  enable  them  afterwards  to  urge 
him  to  the  further  sacrifice  of  his  blood.  Nothing,  but  the  obstinacy 
of  human  passion  and  weakness,  could  induce  me  again  and  again 
to  repeat  these  unpalatable  truths,  at  the  risk  of  incurring  the  charge 
of  declamation. 

The  consumption  effected  by  the  government*  forms  so  large  a 
portion  of  the  total  national  consumption,  amounting  sometimes  to  a 
sixth,  a  fifth,  or  even  a  fourth  partf  of  the  total  consumption  of  the 

*  By  government,  I  mean,  the  ruling  power  in  all  its  branches,  and  under 
whatever  constitutional  form ;  it  would  be  wrong  to  limit  the  term  to  the  execu- 
tive branch  alone;  the  first  enactment  of  a  law  is  as  much  an  act  of  authority, 
as  its  subsequent  enforcement. 

f  The  consumption  of  a  nation  may  undoubtedly  exceed  its  aggregate  annual 
icvenue;  but  we  can  hardly  suppose  that  of  Great  Britain  to  have  done  so;  for 
she  has  evidently  been  advancing  in  opulence,  up  to  the  present  time,  whence  it 
may  be  inferred,  that  her  consumption,  at  the  very  utmost,  only  equals  her  reve- 
nue. Gentz,  who  will  hardly  be  accused  of  underrating  the  financial  resources 
of  that  country,  estimated  her  total  annual  revenue  at  no  more  than  two  hundred 
millions  sterling;  Dr.  Beeke  at  two  hundred  and  eighteen  millions,  inclusive  of 
one  hundred  millions  for  the  revenues  of  industry.  Granting  her  to  have  made 
some  farther  progress  since  those  estimates  were  made,  and  that  her  total  reve- 
nue in  1813  had  advanced  to  two  hundred  and  twenty-four  millions,  we  are  told 
by  Colquhoun,  in  his  Wealth,  Power,  and  Resources  of  the  British  Empire,  that 
her  public  expenditure  in  that  year  amounted  to  one  hundred  and  twelve  mil- 
lions. By  this  statement  it  should  seem,  that  her  public  expenditure  then 
amounted  to  the  half  of  the  total  expenditure  of  the  nation  !  Moreover,  the  ex- 
penses of  her  central  government  do  not  include  all  her  public  charges;  there 
are  to  be-  added,  county  and  parish  rates,  poor  rates,  &c.  &c.  The  business  of 
government  might  be  conducted,  even  in  extensive  empires,  at  a  charge  of  not 
more  than  one  per  cent,  upon  the  aggregate  of  individual  revenue ;  but,  to  attain 
this  degree  of  perfection,  a  vast  improvement  is  still  requisite  in  the  department 
of  practical  policy.  (!) 

(1)  We  copy  f-om  a  Treatise  on  the  Taxation  of  the  British  Empire,  by  R. 
Montgomery  Martin,  published  in  London,  in  1833,  the  following  note: — "Lord 
Liverpool  s-iH,  m  1822,  that  the  annual  income  of  Great  Britain,  after  making 
allowances  for  the  reduction  of  rents,  and  the  diminution  of  the  profits  of  trade 
since  the  war,  may  be  stated  to  be  from  250,000,000*.  to  280,000,000*.  sterling. 
Now  if  the  population  of  Great  Britain  in  1833  be  taken  in  round  numbers  at 
16  millions,  and  the  average  expenditure  for  each  individual  be  so  low  as  one 
shilJinif  per  day,  or  18*.  5s.  a-year,  the  annual  income  would  be  452,000,000*. 
and  double  that  sum  if  the  average  expenditure  of  each  individual  were  taken  at 
(wo  shillings  per  day,  which  would  not  be  an  unreasonable  calculation:  applying 
the  same  rule  to  Ireland,  but  giving  the  average  expenditure  of  each  individual 
FO  low  as  sixpence  a-day,  on  a  population  of  eight  millions,  the  annual  income 
of  Ireland  would  be  73,000,000*.  Thus  the  annual  income  of  the  United  King 
dom  in  1833,  is  upwards  of  500,000,000*.  sterling  on  the  lowest  computation." 

Estimating,  on  s:ich  authority,  the  annual  income  of  Great  Britain  and  Ireland 
at  500  millions  sterling,  we  perceive  that  this  income,  even  after  the  payment  of 
the  taxes,  enormous  as  they  have  been,  is  much  greater  now  than  at  any  former 
period  of  her  history ;  and  there  therefore  can  be  no  doubt  that  a  continue*' 

3C 


416  ON  CONSUMPTION.  BOOK  IIL 

community,  that  the  system  acted  upon  by  the  government,  must 
needs  have  a  vast  influence  upon  the  advance  or  decline  of  the  na- 
tional prosperity.  Should  an  individual  take  it  into  his  head,  that 
the  more  he  spends  the  more  he  gets,  or  that  his  profusion  is  a  virtue ; 
or  should  he  yield  to  the  powerful  attractions  of  pleasure,  or  the 
suggestions  of  perhaps  a  reasonable  resentment,  he  will  in  all  proba- 
bility be  ruined,  and  his  example  will  operate  upon  a  very  small 
circle  of  his  neighbours.  But  a  mistake  of  this  kind  in  the  govern- 
ment, will  entail  misery  upon  millions,  and  possibly  end  in  the  na- 
tional downfal  or  degradation.  It  is  doubtless  very  desirable,  that 
private  persons  should  have  a  correct  knowledge  of  their  personal 
interests ;  but  it  must  be  infinitely  more  so,  that  governments  should 
possess  that  knowledge.  Economy  and  order  are  virtues  in  a 
private  station ;  but,  in  a  public  station,  their  influence  upon  national 
happiness  is  so  immense,  that  one  hardly  knows  how  sufficiently  to 
extol  and  honour  them  in  the  guides  and  rulers  of  national  cond'uct. 

An  individual  is  fully  sensible  of  the  value  of  the  article  he  is 
consuming;  it  has  probably  cost  him  a  world  of  labour,  perseverance, 
and  economy;  he  can  easily  balance  the  satisfaction  he  derives  from 
its  consumption  against  the  loss  it  will  involve.  But  a  government 
is  not  so  immediately  interested  in  regularity  and  economy,  nor  does 
it  so  soon  feel  the  ill  consequences  of  the  opposite  qualities.  Besides, 
private  persons  have  a  further  motive  than  even  self-interest ;  their 
feelings  are  concerned;  their  economy  may  be  a  benefit  to  the 
objects  of  their  affection ;  whereas,  the  economy  of  a  ruler  accrues 
to  the  benefit  of  those  he  knows  very  little  of;  and  perhaps  he  is  but 
husbanding  for  an  extravagant  and  rival  successor. 

Nor  is  this  evil  remedied,  by  adopting  the  principle  of  hereditary 
rule.  The  monarch  has  little  of  the  feelings  common  to  other  men 
in  this  respect.  He  is  taught  to  consider  the  fortune  of  his  descend- 
ants as  secure,  if  they  have  ever  so  little  assurance  of  the  succes- 
sion. Besides,  the  far  greater  part  of  the  public  consumption  is  not 
personally  directed  by  himself;  contracts  are  not  made  by  himself, 
but  by  his  generals  and  ministers;  the  experience  of  the  world 
hitherto  all  tends  to  show,  that  aristocratical  republics  are  more 
economical,  than  cither  monarchies  or  democracies. 

Neither  are  we  to  suppose,  that  the  genius  which  prompts  and 
excites  great  national  undertakings,  is  incompatible  with  the  spirit 
of  public  order  and  economy.  The  name  of  Charlemagne  stands 
among  the  foremost  in  the  records  of  renown ;  he  achieved  the  con- 
quest of  Italy,  Hungary,  and  Austria ;  repulsed  the  Saracens ;  broke 
the  Saxon  confederacy ;  and  obtained  at  length  the  honours  of  the 
purple.  Yet  Montesquieu  has  thought  it  not  derogatory  to  say  of 

augmentation  of  the  national  capital  must  take  place,  even  in  defiance  of  many 
obstructions.  The  public  expenditure,  too,  of  the  same  kingdom,  is  in  course  of 
pradual  reduction.  During  the  late  war,  as  has  been  observed  by  our  author,  on 
the  authority  of  Colquhoun,  the  public  expenditure  of  the  year  1813  amounted 
to  112  millions,  whereas  in  1830  it  was  about  34  millions,  in  1831,  33  millions, 
and  in  1832  not  so  much  by  100.000Z.  sterling.  AMERICAN  EDITOR. 


CHAP.  VI.  ON  CONSUMPTION.  419 

him,  that  "  the  father  of  a  family  might  take  a  lesson  of  good  house- 
keeping from  the  ordinances  of  Charlemagne.  His  expenditure  was 
conducted  with  admirable  system  ;  he  had  his  demesnes  valued  with 
care,  skill,  and  minuteness.  We  find  detailed  in  his  capitularies 
the  pure  and  legitimate  sources  of  his  wealth.  In  a  word,  such  were 
his  regularity  and  thrift,  that  he  gave  orders  for  the  eggs  of  his 
poultry-yards,  and  the  surplus  vegetables  of  his  garden,  to  be 
brought  to  market."*  The  celebrated  Prince  Eugene,  who  dis- 
played equal  talent  in  negotiation  and  administration  as  in  the 
field,  advised  the  Emperor  Charles  VI.  to  take  the  advice  of  mer- 
chants and  men  of  business,  in  matters  of  finance.f  Leopold,  when 
Grand  Duke  of  Tuscany,  towards  the  close  of  the  18th  century, 
gave  an  eminent  example  of  the  resources,  to  be  derived  from  a 
rigid  adherence  to  the  principles  of  private  economy,  in  the  ad- 
ministration of  a  state  of  very  limited  extent.  In  a  few  years,  he 
made  Tuscany  one  of  the  most  flourishing  states  of  Europe. 

The  most  successful  financiers  of  France,  Suger,  Abbe  de  St. 
Dennis,  the  Cardinal  D'Amboise,  Sully,  Colbert,  and  Necker,  have 
all  acted  on  the  same  principle.  All  found  means  of  carrying  into 
effect  the  grandest  operations  by  adhering  to  the  dictates  of  private 
economy.  The  Abbe  de  St.  Dennis  furnished  the  outfit  of  the  second 
crusade ;  a  scheme  that  required  very  large  supplies,  although  one  I 
am  far  from  approving.  The  Cardinal  furnished  Louis  XII.  with 
the  means  of  making  his  conquest  of  the  Milanese.  Sully  accumu- 
lated the  resources,  that  afterwards  humbled  the  house  of  Austria. — 
Colbert  supplied  the  splendid  operations  of  Louis  XIV.  Necker 
provided  the  ways  and  means  of  the  only  successful  war  waged  by 
France  in  the  18th  century. J 

Those  governments,  on  the  contrary,  that  have  been  perpetually 
pressed  with  the  want  of  money,  have  been  obliged,  like  individuals, 
to  have  recourse  to  the  most  ruinous,  and  sometimes  the  most  dis- 
graceful, expedients  to  extricate  themselves.  Charles  the  Bald  put 
his  titles  and  safe-conducts  up  to  sale.  Thus,  too,  Charles  II.  of 
England  sold  Dunkirk  to  the  French  king,  and  took  a  bribe  of 
80,000/.  from  the  Dutch,  to  delay  the  sailing  of  the  English  expe- 
dition to  the  East  Indies,  1680,  intended  to  protect  their  settlements 
in  that  quarter,  which,  in  consequence,  fell  into  the  hands  of  the 
Dutchmen.^  Thus,  too,  have  governments  committed  frequent  acts 

*  Esprit  des  Lois,  liv.  xxxi.  c.  18. 

f  Memoires  du  Prince  Eugene  par  luimeme,  p.  187.  The  authenticity  of  this 
work  has  been  contested,  as  well  as  the  Testament  Politique  of  Richelieu.  If 
not  themselves  the  authors,  they  must  at  least  have  been  men  of  eq^al  capacity, 
of  which  there  is  still  less  probability. 

I  He  contrived  to  meet  the  charges  of  the  American  war,  without  the  impo- 
sition of  any  additional  taxes.  He  has  been  reproached,  indeed,  with  having 
incurred  heavy  loans ;  but  it  is  obvious,  that,  so  long  as  he  found  means  to  pay 
the  interest  upon  them  without  fresh  taxation,  they  were  nowise  burthensome 
upon  the  nation ;  and  that  the  interest  must  have  been  defrayed  by  letrenchmem 
of  the  expenditure. 

}  Raynal.     Histoire  des  Etab.  des  Europ.  dans  les  Indes,  torn.  iL  p.  36 


420  ON  CONSUMPTION.  BOOK  III. 

of  ban  ruptcy,  sometimes  in  the  shape  of  adulteration  of  their  coin, 
and  sometimes  by  open  breach  of  their  'engagements. 

Louis  XIV.  towards  the  close  of  his  reign,  having  utterly  ex- 
hausted the  resources  of  a  noble  territory,. was  reduced  to  the  paltry 
shift  of  creating  the  most  ridiculous  offices,  making  his  counsellors 
of  state,  one  an  inspector  of  fagots,  another  a  licenser  of  barber-wig- 
makers,  another,  visiting  inspector  of  fresh,  or  taster  of  salt,  butter, 
and  the  like.  Such  paltry  and  mischievous  expedients  can  never 
long  defer  the  hour  of  calamities,  that  must  sooner  or  later  befal  the 
extravagant  and  spendthrift  governments.  "  When  a  man  will  not 
listen  to  reason,"  says  Franklin,  "  she  is  sure  to  make  herself  felt." 

Fortunately,  an  economical  administration  soon  repairs  the  mis- 
chiefs of  one  of  an  opposite  character.  Sound  health  can  not  be 
restored  all  at  once ;  but  there  is  a  gradual  and  perceptible  improve- 
ment ;  every  day  some  cause  of  complaint  disappears,  and  some  new 
faculty  comes  again  into  play.  Half  the  remaining  resources  of  a 
nation,  impoverished  by  an  extravagant  administration,  are  neutral- 
ized by  alarm  and  uncertainty ;  whereas,  credit*  doubles  those  of  a 
nation,  blessed  with  one  of  a  frugal  character.  It  would  seem,  that 
there  exists  in  the  politic,  to  a  stronger  degree  than  even  in  the 
natural,  body  a  principle  of  vitality  and  elasticity,  which  can  not 
be  extinguished  without  the  most  violent  pressure.  One  can  not 
look  into  the  pages  of  history,  without  being  struck  with  the  rapidity, 
with  which  this  principle  has  operated.  It  has  nowhere  been  more 
strikingly  exemplified,  than  in  the  frequent  vicissitudes  that  our 
own  France  has  experienced  since  the  commencement  of  the  revo- 
lution. Prussia  has  afforded  another  illustration  in  our  time.  The 
successor  of  Frederick  the  Great  squandered  the  accumulations  of 
that  monarch,  which  were  estimated  at  no  less  a  sum  than  42  millions 
of  dollars,  and  left  behind  him,  besides,  a  debt  of  27  millions.  In 
less  than  eight  years,  Frederick  William  III.  had  not  only  paid  off 
his  father's  debts,  but  actually  began  a  fresh  accumulation ;  such  is 
the  power  of  economy,  even  in  a  country  of  limited  extent  and 
resources. 

*  The  expressions,  credit  is  declining,  credit  is  reviving,  are  common  in  the 
mouths  of  the  generality,  who  are,  for  the  most  part,  ignorant  of  the  precise 
meaning  of  credit.  It  does  not  imply  confidence  in  the  government  exclusively ; 
for  the  bulk  of  the  community  have  no  concern  with  government,  in  respect  to 
their  private  affairs.  Neither  is  it  exclusively  applied  to  the  mutual  confidence 
of  individuals;  fora  person  in  good  repute  and  circumstances,  does  not  forfeit 
them  all  at  once ;  and,  even  in  times  of  general  distress,  the  forfeiture  of  indi- 
vidual character  is  by  w  means  so  universal,  as  to  justify  the  assertion,  that 
credit  is  at  an  end.  It  \\-rjuld  rather  seem  to  imply,  confidence  in  future  events. 
The  temporary  dread  of  taxation,  arbitrary  exaction,  or  violence,  will  deter  num- 
bers from  exposing  their  persons  or  their  property  ;  undertakings,  however  pro- 
mising and  well-planned,  become  too  hazardous;  new  ones  are  altogether  dis- 
coiimgwl,  old  ones  feel  a  diminution  of  profit;  merchants  contract  their  opera- 
tions;, and  consumption  in  general  falls  off,  in  consequence  of  the  decline  and 
the  uncertainty  of  individual  revenue.  There  can  he  no  confidence  in  future 
?vents,  either  under  an  enterprising,  ambitious,  or  unjust  government,  or  under 
one,  that  is  wanting  in  strength,  decision,  or  method.  Credit,  like  crystalliza- 
tion, can  only  take  place  in  a  state  of  quiescence. 


CHAP.  VI.  ON  CONSUMPTION.  491 

SECTION  II. 
Of  the  principal  Objects  of  National  Expenditure. 

In  the  preceding  section,  it  has  been  endeavoured  to  show,  that, 
since  all  consumption  by  the  public  is  in  itself  a  sacrifice  of  value, 
an  evil  balanced  only  by  such  benefit,  as  may  result  to  the  commu- 
nity from  the  satisfaction  of  any  of  its  wants,  a  good  administration 
will  never  spend  for  the  mere  sake  of  spending,  but  take  care  to 
ascertain  that  the  public  benefit,  resulting,  in  such  instance,  from  the 
satisfaction  of  a  public  want,  shall  exceed  the  sacrifice  incurred  in 
its  acquirement. 

A  comprehensive  view  of  the  principal  public  wants  of  a  civilized 
community,  can  alone  qualify  us  to  estimate  with  tolerable  accuracy 
the  sacrifice  it  is  worth  while  for  the  community  to  make  for  their 
gratification.* 

The  public  consumes  little  else,  but  what  have  been  denominated 
Immaterial  products,  that  is  to  say,  products  destroyed  as  soon  as 
created ;  in  other  words,  the  services  or  agency,  either  of  human 
beings,  or  of  other  objects,  animate  or  inanimate.! 

It  consumes  the  personal  service  of  all  its  functionaries,  civil, 
judicial,  military,  or  ecclesiastical.  It  consumes  the  agency  of  land 
and  capital.  The  navigation  of  rivers  and  seas,  utility  of  roads  and 

f  round  open  to  the  public,  are  so  much  agency  derived  by  the  pub- 
c  from  land,  of  which  either  the  absolute  property,  or  the  beneficial 
enjoyment,  is  vested  in  the  public.  Where  capital  has  been  vested 
in  the  land,  in  the  shape  of  buildings,  bridges,  artificial  harbours, 
causeways,  dikes,  canals,  &c.  the  public  then  consumes  the  agency, 
or  the  rent  of  the  land,  plus  the  agency,  or  the  interest,  of  the  capi- 
ta) so  vested. 

Sometimes  the  public  maintains  establishments  of  productive 
industry  for  instance,  the  porcelain  manufacture  of  Sevres,  the 
Gobelin  tapestry,  the  salt-works  of  Lorraine  and  of  the  Jura,  &c., 
in  France.  When  concerns  of  this  kind  bring  more  than  their  ex- 
penditure, which  is  but  rarely  the  case,  they  furnish  part  of  the  na- 
tional revenue,  and  must  by  no  means  be  classed  among  the  items 
of  national  charge. 

Of  the  Charge  of  Civil  and  Judicial  Administration. 

Tht  chaige  of  civil  and  judicial  administration  is  made  up, 
partly  of  the  specific  allowances  of  magistrates  ana  other  officers, 

*  A  mere  sketch  is  all  that  can  be  expected  in  a  work  like  the  present:  a  com- 
plete treatise  on  government  would  be  equally  appropriate  with  a  survey  of  the 
arts,  when  it  became  incidentally  necessary  to  touch  upon  the  processes  of 
manufacture.  Yet,  either  would  be  a  valuable  addition  to  literary  wealth. 

fThis  rule  must  be  taken  with  some  qualification.  The  habitual  largesses  of 
corn,  distributed  by  the  emperors  to  the  people  of  ancient  Rome,  were  material 
objects  of  public  consumption.  So  likewise  the  provisions  of  all  kinds  consumed 
in  hospitals  and  prisons,  and  the  fireworks  used  on  occasions  of  public  display  or 

or,  for  the  amusement  of  the  people  at  large. 
36 


422  ON  CONSUMPTION.  BOOK  HI. 

and  partly  of  such  degree  of  pomp  and  parade,  as  may  be  deemed 
necessary  in  the  execution  of  their  duties.  Even  if  the  burthen  of 
that  pomp  and  parade  be  thrown  wholly  or  partially  upon  the  public 
functionary,  it  must  ultimately  fall  upon  the  shoulders  of  the  public, 
tor  the  salary  of  the  functionary  must  be  raised,  in  proportion  to  tho 
appearance  he  is  expected  to  make.  This  observation  applies  to  every 
description  of  functionary,  from  the  prince  to  the  constable  include- 
consequently,  a  nation,  which  reverences  its  prince  only  when  &ur 
rounded  with  the  externals  of  greatness,  with  guards,  horse  and 
foot,  laced  liveries,  and  such  costly  trappings  of  royalty,  must  pay 
dearly  for  its  taste.  If,  on  the  contrary,  it  can  be  content,  to  lespect 
simplicity  rather  than  pageantry,  and  obey  the  laws,  though  unaided 
by  the  attributes  of  pomp  and  ceremony,  it  will  save  in  p/oportion. 
This  is  what  made  the  charges  of  government  so  light  in  many  of 
the  Swiss  cantons,  before  the  revolution,  and  in  the  North  American 
colonies  before  their  emancipation.  It  is  well  known,  that  those 
colonies,  though  under  the  dominion  of  England,  had  separate 
governments,  of  which  they  respectively  defrayed  the  charge ;  yet 
the  whole  annual  expenditure  all  together  amounted  to  no  more  than 
64,7007.  sterling.  "  An  ever  memorable  example,"  observes  Smith, 
"  at  how  small  an  expense  three  millions  of  people  may  not  only  be 
governed,  but  well  governed."* 

*  It  should  be  recollected,  however,  that  they  were  at  no  charge  of  defence 
from  external  attack,  except  in  respect  to  the  savage  tribes  of  the  interior. 

From  the  official  account  of  the  receipts  and  disbursements  of  the  United 
States,  in  the  year  1806,  presented  by  Mr.  Gallatin,  then  Secretary  of  the  Trea- 
sury, it  appears  that  the  total  expenditure  fell  short  of  twelve  millions  of  dollars. 
of  which  eight  millions  went  to  pay  the  interest  of  the  public  debt ;  leaving  a 
sum  of  four  millions  only  for  the  charge  of  government,  that  is  to  say,  the  civil, 
judicial,  military,  and  other  public  functions  of  a  population  of  twelve  millions: 
which  is  wholly  defrayed  by  taxes  on  imports.  (1) 

(1)  At  the  period  to  which  our  author  here  refers,  namely,  the  year  1806,  the 
actual  expenditure  by  the  government  of  the  United  States,  for  that  year,  accord- 
ing to  the  report  of  the  Secretary  of  the  Treasury,  was  15,070,093  dollars  97  cents, 
and  of  this  amount,  according  to  the  same  authority,  8,989,884  dollars  61  cents, 
was  on  account  of  the  extinguishment  of  the  principal  and  interest  of  the  public 
debt.  The  population  of  the  United  States,  for  the  same  year,  was  only  about  6 
millions ;  for,  according  to  the  official  enumerations,  the  population,  in  the  year 
1800,  was  5,305,925,  and  in  the  year  1810,  was  7,239,814.  Now  the  charges 
of  the  government,  exclusive  of  the  payment  of  the  public  debt,  it  will  be  seen, 
amounted  then  t*6,080,209  dollars  36  cents,  or  an  expenditure  equal  to  more 
than  treble  the 'amount  given  by  our  author. 

The  whole  public 'expenditure  of  the  people  of  the  United  States  necessarily 
embraces  the  local  disbursements  of  the  different  states,  as  well  as  the  expendi- 
ture of  the  general  government.  Of  the  former,  we  have,  as  yet,  no  means  of 
presenting  our  readers  with  any  accurate  or  official  account,  and  we  will  not 
venture  to  indulge  in  any  loose  estimates.  Of  the  latter,  however,  we  are  en- 
abled to  furnish  a  tabular  view,  extracted  from  the  letter  of  the  Secretary  of  the 
Treasury  to  the  Chairman  of  the  Committee  of  the  House  of  Representatives 
on  Retrenchment,  April  9,  1830,  and  from  the  subsequent  annual  Treasury  Re- 
ports, which  will  exhibit  an  authentic  and  accurate  view  of  the  receipts  and 
expenditures  of  the  Federal  Government,  from  the  4th  of  March,  1789,  the 
period  of  its  commencement,  to  the  31st  of  December,  1832,  the  last  date  to 
which  the  accounts  have  been  all  made  up. 


CHAP.  VI. 


ON  CONSUMPTION. 


423 


Causes  entirely  of  a  political  nature  as  well  as  the  form  of  govern- 
ment which  they  help  to  determine,  have  an  influence  in  apportion- 
ing the  salaries  of  public  officers,  civil  and  judicial,  the  charge  of 
public  display,  and  those  likewise  of  public  institutions  and  establish- 

We  also  subjoin  the  last  official  revision  of  the  population  returns  of  the  seve- 
ral states  and  territories,  according  to  the  five  enumerations  of  the  years  1790, 
1800,  1810,  1820,  and  1830. 


RECEIPTS 

From  March  4,  1789,  to  December  31,  1833. 

YEARS.              CUSTOMS. 

TOTAL. 

From  March  4,  1789,  to 

Dec.  31,  1791 

$4,399,473  09 

$10,210,025  75 

"  "  1792 

3,443,070  85 

8,740,766  77 

"  "  1793 

4,255,606  56 

5,720,624  28 

"  "  1794 

4,801,065  28 

10,041,101  65 

,  "  "  1795 

5,588,461  26 

9,419,802  79 

"  "  1796 

6,567,987  94 

8,740,329  65 

"  "  1797 

7,549,649  65 

8,758,916  40 

"  *  1798 

7,106,061  93 

8,209,070  07 

"  "  1799 

6,610,449  31 

12,621,459  84 

"  "  1800 

9,080,932  73 

12,451,184  14 

"  "  1801 

10,750,778  93 

12,945,455  95 

"  "  1802 

12,438,235  74 

15,001,391  31 

"  "  1803 

10,479,417  61 

11,064,097  63 

"  "  1804 

11,098,565  33 

11,835,640  02 

"  "  1805 

12,936,487  04 

13,689,508  14 

"  "  1806 

14,667,698  17 

15,608,823  78 

"  "  1807 

15,845,521  61 

16,398,019  26 

"  "  1808 

16,363,550  58 

17,062,544  09 

"  "  1809 

7,296,020  58 

7,773,473  12 

"  "  1810 

8,583,309  31 

12,144,206  53 

"  "  1811 

13,313,222  73 

14,431,838  14 

"  "  1812 

8,958,777  53 

22,639,032  76 

"  "  1813 

13,224,623  25 

40,524,844  95 

"  "  1814 

5,998,772  08 

34,559,536  95 

"  "  1815 

7,282,942  22 

50,961,237  60 

"  "  1816 

36,306,874  88 

57,171,421  82 

"  "  1817 

26,283,348  49 

33,833,592  33 

"  "  1818 

17,176,385  00 

21,593,936  66 

"  "  1819 

20,283,608  76 

24,605,665  37 

"  "  1820 

15,005,612  15 

20,881,493  68 

"  "  1821 

13,004,447  15 

19,573,703  72 

"  "  1822 

17,589,761  94   . 

20,232,427  94 

"  "  1823 

19,088,433  44 

20,540,666  26 

"  "  1824 

17,878,325  71 

24,381,212  79 

"  "  1825 

20,098,713  45 

26,840,858  02 

"  "  1826 

23,341,331  77 

25,260,434  21 

"  "  1827 

19,712,283  29 

22,966,363  96 

"  "  1828 

23,205,523  64 

24,763,629  23 

"  "  1829 

22,681,965  91 

24,767,122  22 

"  "  1830 

21,922,391  39 

24,844,116  51 

"  "  1831 

24,224,441  97 

28,526,820  82 

"  "  1832 

28,465,237  21 

31,865,561  16 

"  "  1833 

29,032,508  91 

33,948,426  25 

$623,941,576  17 

$878,150,589  52 

424 


ON  CONSUMPTION. 


BOOK  IIL 


merits.  Thus,  in  a  despotic  government,  where  the  subject  holds 
his  property  at  the  will  of  the  sovereign,  who  fixes  himself  the 
charge  of  his  household,  that  is  to  say,  the  amount  of  the  public 
money  which  he  chooses  to  spend  on  his  personal  necessities  and 
pleasures,  and  the  keeping  up  of  the  royal  establishment,  that  charge 
will  probably  be  fixed  at  a  higher  rate,  than  where  it  is  arranged  and 


EXPENDITURES 

From  March  4,  1789,  to  December  31,  1833. 

YEARS. 

PUBLIC  DKUT. 

TOTAL. 

From  March  4,  1789,  to 

Dec.  31,  1791 

$5,287,949  50 

$7,207,539  08 

"  "  1792 

7,263,665  99 

9,141,569  67 

"  "  1793 

5,819,505  29 

7,529,575  55 

"  "  1794 

5,801,578  09 

9,302,124  74 

"  "  1795 

6,084,411  61 

10,435,069  65 

"  "  1796 

5,835,846  44 

8,367,776  84 

"  "  1797 

5,792,421  82 

8,626,012  78 

"  "  1798 

3,990,294  14 

8,613,517  68 

"  "  1799 

4,596,876  78 

11,077,043  50 

"  "  1800 

4,578,369  95 

11,989,739  92 

"  "  1801 

7,291,707  04 

12,273,376  94 

"  "  1802 

9,539,004  76 

13,276,084  67 

"  "  1803 

7,256,159  43 

11,258,983  67 

"  "  1804 

8,171,787  45 

12,624,646  36 

"  "  1805 

7,369,889  79 

13,727,124  41 

"  "  1806 

8,989,884  61 

15,070,093  97 

"  "  1807 

6,307,720  10 

11,292,292  99 

"  "  1808 

10,260,245  35 

16,764,584  20 

"  "  1809 

6,452,554  16 

13,867,226  30 

"  "  1810 

8,008,904  46 

13,319,986  74 

"  "  1811 

8,009,204  05 

13,601,808  91 

"  "  1812 

4,449,622  45 

22,279,121  15 

"  *  1813 

11,108,128  44 

39,190,520  36 

"  "  1814 

7,900,543  94 

38,028,230  32 

"  "  1815 

12,628,922  35 

39,582,493  35 

"  "  1816 

24,871,062  93 

48,244,495  51 

"  "  1817 

25,423,036  12 

40,877,646  04 

"  "  1818 

21,296,201  62 

35,104,875  40 

"  "  1819 

7,703,926  29 

24,004,199  73 

"  "  1820 

8,628,494  28 

21,763,024  85 

"  "  1821 

8,367,093  62 

19,090,572  69 

"  '  1822 

7,848,949  12 

17,676,592  63 

1  '  1823 

5,530,016  41 

15,314,171  00 

"  *  1824 

16,568,393  76 

31,898,538  47 

"  '  1825 

12,095,344  78 

23,585,804  72 

1826 

11,041,032  19 

24,103,398  46 

'   '  1827 

10,003,668  39 

22,656,765  04 

1   '  1828 

12,163,438  07 

25,459,479  52 

1   '  1829 

12,383,800  77 

25,071,017  59 

*  "  1830 

11,355,748  22 

24,5a5,281  55 

'  "  1831 

16,174,378  22 

30,038,446  12 

'  "  1832 

17,840,309  29 

34,356,698  06 

"  "  1833 

1,543,543  38 

24,257,298  49 

..   

$409,633,680  45 

$866,534,848  56 

CHAP.  VI. 


ON  CONSUMPTION. 


425 


contested  between  the  representatives  of  the  prince  and  of  the  tax 
payers  respectively. 

The  salaries  of  inferior  public  officers  in  like  manner  depend, 
partly  upon  their  individual  importance,  and  partly  upon  the  gene- 
ral plan  of  government.  Their  services  are  dear  or  cheap  to  the  pub- 
lic, not  merely  in  proportion  to  what  they  actually  cost,  but  likewise 
in  proportion  as  they  are  well  or  ill  executed.  A  duty  ill  performed 
is  dearly  bought,  however  little  be  paid  for  it ;  it  is  'dear  too,  if  it 
be  superfluous,  or  unnecessary ;  resembling  in  this  respect  an  article 
of  furniture,  that,  if  it  do  not  answer  its  purpose,  or  be  not  wanted, 
is  merely  useless  lumber.  Of  this  description,  under  the  old  regime 
of  France,  were  the  officers  of  high-admiral,  high-steward  of  the 
household,  the  king's  cup-bearer,  the  master  of  his  hounds,  and  a 
variety  of  others,  which  added  nothing  even  to  the  splendour  of 
royalty,  and  were  merely  so  many  means  of  dispensing  personal 
favour  and  emolument. 

For  the  same  reason,  whenever  the  officers  of  government  arc 


POPULATION  OF  THE  UNITED  STATES, 
According  to  Five  Enumerations  ;  from  the  Official  Revision. 

States. 

1790. 

1800. 

1810. 

1820. 

1830. 

96,540 
141,899 
85,416 
378,717 
69,110 
238,141 
340,120 
184,139 
434,373 
59,096 
319,728 
748,308 
393,751 
249,073 
82,548 

35,791 
73,077 

151,719 
183,762 
154,465 
423,245 
69,122 
251,002 
586,756 
211,949 
602,365 
64,273 
341,548 
880,200 
478,103 
345,591 
162,101 

'  8,850 

105,602 
220,955 
45,365 

4,875 

14,093 

228,705 
214,360 
217,713 
472,040 
77,031 
262,042 
959,949 
249,555 
810,091 
72,674 
380,546 
974,622 
555,500 
415,115 
252,433 
20,845 
40,352 
76,556 
261,727 
406,511 
230,760 
24,520 
12,282 
20,845 
24,023 

298,335 
244,161 
235,764 
523,287 
83,059 
275,202 
1,372,812 
277,575 
1,049,458 
72,749 
407,350 
1,065,379 
638,829 
502,741 
340,987 
127,901 
75,448 
153,407 
422,813 
564,317 
581,434 
147,178 
55,211 
66,586 
33,039 

399,955 
269,328 
280,652 
610,408 
97,199 
297,665 
1,918,608 
320,823 
1,348,233 
76,748 
447,040 
1,211,405 
.737,987 
581,185 
516,823 
309,527 
136,621 
215,739 
681,904 
687,917 
937,903 
343,031 
157,455 
140,445 
39,834 
34,730 
31,639 
30,388 
i 

New  Hampshire  .  . 

Massachusetts  .  .  . 
Rhode  Island    .  .  . 
Connecticut  .... 

New  Jersey   .... 
Pennsylvania    .  .  . 
Delaware    ..... 

Maryland    

North  Carolina    .  . 
South  Carolina    .  . 

Ohio  

Illinois  

Missouri  

District  of  Columbia 
Florida  Territory   . 
Michigan  Territory 
Arkansas  Territory 

•     • 

•      • 

4,762 

8,896 
14,273 

Total  .... 

3,929,827 

5,305,925  7,239,814i9,638,131  12,866,020 
AMERICAN  EDIIOR. 

36* 


3D 


426  ON  CONSUMPTION.  BOOB  III. 

needlessly  multiplied,  the  people  are  saddled  with  charges,  which 
are  not  necessary  to  the  maintenance  of  public  order.  It  is  only 
giving  an  unnecessary  form  to  that  benefit,  or  product,  which  is  not 
at  all  the  better  of  it,  if  indeed  it  be  not  worse.*  A  bad  goverriment, 
that  can  not  support  its  violence,  injustice,  and  exaction,  without  a 
multitude  of  mercenaries,  satellites,  and  spies,  and  gaols  innumer- 
able, makes  its  subjects  pay  for  its  prisons,  spies,  and  soldiers,  which 
nowise  contribute  to  the  public  happiness. 

On  the  other  hand,  a  public  duty  may  be  cheap,  although  very 
liberally  paid.  A  low  salary  is  wholly  thrown  away  upon  an  inca- 
pable and  inefficient  officer ;  his  ignorance  will  probably  cost  the 
public  ten  times  the  amount  of  his  salary;  but  the  knowledge  and 
activity  of  a  man  of  ability  are  fully  equivalent  to  the  pay  he  re- 
ceives; the  losses  he  saves  to  the  public,  and  the  benefits  derived 
from  his  exertions,  greatly  outweigh  his  personal  emolument,  even 
if  settled  on  the  most  liberal  scale. 

There  is  real  economy  in  procuring  the  best  of  every  thing,  even 
at  a  larger  price.  Merit  can  seldom  be  engaged  at  a  low  rate,  be- 
cause it  is  applicable  to  more  occupations  than  one.  The  talent,  that 
makes  an  able  minister,  would,  in  another  profession,  make  a  good 
advocate,  physician,  fanner,  or  merchant;  and  merit  will  find  both 
employment  and  emolument  in  all  these  departments.  If  the  public 
service  offer  no  adequate  reward  for  its  exertion,  it  will  choose  some 
other  more  promising  occupation. 

Integrity  is  like  talent ;  it  can  not  be  had  without  paying  for  it, 
which  is  not  at  all  wonderful ;  for  the  honest  man  can  not  resort  to 
those  discreditable  shifts  and  contrivances,  which  dishonesty  looks 
to  as  a  supplemental  resource. 

The  power,  which  commonly  accompanies  the  exercise  of  public 
functions,  is  a  kind  of  salary,  that  often  far  exceeds  the  pecuniary 
emolument  attached  to  them.  It  is  true,  that  in  a  well  ordered 
state,  where  law  is  supreme,  and  little  is  left  to  the  arbitrary  con- 
trol of  the  ruler,  there  is  little  opportunity  of  indulging  the  caprice 
and  love  of  domination  implanted  in  the  human  breast.  Yet  the 
discretion,  which  the  law  must  inevitably  vest  in  those  who  are  to 
enforce  it,  and  particularly  in  the  ministerial  department,  together 
with  the  honour  commonly  attendant  on  the  higher  offices  of  the 
state,  have  a  real  value,  which  makes  them  eagerly  sought  for, 
even  in  countries  where  they  are  by  no  means  lucrative. 

The  rules  of  strict  economy  would  probably  make  it  advisable  to 
abridge  all  pecuniary  allowance,  wherever  there  are  other  suffi- 
cient attractions  to  excite  a  competition  for  office,  and  to  confer  it 
on  none  but  the  wealthy,  were  there  not  a  risk  of  losing,  by 
the  incapacity  of  the  officer,  more  than  would  be  gained  by  the 

*An  example  occurs  to  me  of  a  city  of  France,  whose  municipal  administra- 
tion was  both  mildly  and  efficiently  conducted  before  1789,  at  a  charge  of  1000 
crowns  per  annum  only,  but  under  the  imperial  government,  though  it  :ost 
30,000  Jr.  (5,580  dollars)  afforded  no  security  against  the  caprice  and  arbitrary 
will  of  the  sovereign. 


CHAP.  VL  ON  CONSUMPTION. 

abridgment  of  his  salary.  This,  as  Plato  well  observes  in  his 
Republic,'  would  be  like  entrusting  the  helm  to  the  richest  man 
on  board.  Besides,  there  is  some  danger,  that  a  man,  who  gives 
his  services  for  nothing,  will  make  his  authority  a  matter  of  gain, 
however  rich  he  may  be.  The  wealth  of  a  public  functionary  is 
no  security  against  his  venality:,  for  ample  fortune  is  commonly 
accompanied  with  desires  as  ample,  and  probably  even  more  am- 
ple, especially  if  he  have  to  keep  up  an  appearance,  both  as  a 
man  of  wealth  and  a  magistrate.  Moreover,  supposing  what  is  not 
altogether  impossible,  namely,  that  one  can  meet  with  wealth  united 
with  probity,  and  with,  besides,  the  activity  requisite  to  the  due 
performance  of  public  duty,  is  it  wise  to  run  the  risk  of  adding  the 
preponderance  of  authority  to  that  of  wealth,  which  is  already  but 
too  manifest  ?  With  what  grace  could  his  employers  call  to  account 
an  agent,  who  could  assume  the  merit  of  generosity,  both  with  the 
people  and  with  the  government!  There  are,  however,  some  ways, 
in  which  the  gratuitous  services  of  the  rich  may  be  employed  with 
advantage;  particularly  in  those  departments, that  confer  more  honour 
than  power :  as  in  the  administration  of  institutions  of  public  char- 
ity, or  of  public  correction  or  punishment. 

In  France  under  the  old  regime,  the  government,  when  harassed 
with  the  want  of  money,  was  in  the  habit  of  putting  up  its  offices 
to  sale.  This  is  the  very  worst  of  all  expedients;  it  introduces  all 
the  mischiefs  of  gratuitous  service;  for  the  emolument  is  then  no 
more,  than  the  interest  of  the  capital  expended  in  the  purchase  of 
the  office;  and  has  the  additional  evil  of  costing  to  the  state  as  much 
as  if  the  service  were  not  gratuitously  performed ;  for  the  public 
remains  charged  with  the  interest  of  a  capital,  that  has  been  con- 
sumed and  lost. 

It  has  been  sometimes  the  practice  to  consign  certain  civil  func- 
tions, such  as  the  registry  of  births,  marriages,  and  deaths,  to  the 
ecclesiastical  body,  whose  emoluments,  arising  from  their  clerical 
duties,  may  be  supposed  to  enable  them  to  execute  these  without 
pay.  But  there  is  always  danger  in  confiding  the  execution  of 
civil  duties  to  a  class  of  men,  that  pretend  to  a  commission  from 
a  still  higher  than  a  national  authority.* 

In  spite  of  every  precaution,  the  public  or  the  monarch  will  never 
be  served  so  well  or  so  cheaply  as  individuals.  Inferior  public 

*  Several  times  during  the  last  century  the  Molinist  priesthood  refused  tu 
execute  their  clerical  duties  in  favour  of  the  Jansenists,  in  spite  of  all  the  govern- 
ment could  do;  on  the  pretence,  that  it  was  better  to  obey  the  divine  command 
as  conveyed  by  the  voice  of  the  Pope,  than  that  of  any  human  authority  (a) 

(a)  This  inconvenience  can  arise  only  in  countries,  where  there  is  an  exclusive 
national  church,  subjected,  in  matters  of  doctrine  and  discipline,  to  an  indepen- 
dent or  external  superior :  as  in  countries  embracing  the  faith  of  Rome.  But 
there  is  anoiVr  inconvenience,  that  has  been  much  dwelt  upon  by  an  eminent 
divine  of  the^cottish  church;  viz.  the  inconvenience  of  directing  the  attention 
of  the  priesthood  from  its  clerical  to  civil  functions,  and,  by  a  confusion  of  such 
different  duties,  abridging  the  benefit  of  division  of  labour  T 


428  ON  CONSUMPTION.  BOOK  III. 

agents  can  not  be  so  narrowly  watched  by  their  superiors,  as  pri- 
vate ones;  nor  have  the  superiors  themselves  an  equal  interest  in 
vigilant  superintendence.  Besides,  it  is  easy  enough  for  under- 
lings to  impose  on  a  superior,  who  has  many  to  look  after,  is  per- 
haps placed  at  a  distance,  and  can  give  but  little  attention  to  each 
individually;  and  whose  vanity  makes  him  more  alive  to  the  offi- 
cious zeal  of  his  inferior,  than  to  the  real  service  and  utility,  that 
the  public  good  requires.  As  to  the  monarch  and  the  nation,  who 
are  the  parties  most  interested  in  good  public  administration, 
because  it  consolidates  the  power  of  the  one  and  enlarges  the  hap- 
piness of  the  other,  it  is  next  to  impossible  for  them  to  exert  a  per- 
petual and  effectual  control.  In  most  cases,  this  duty  must  of 
necessity  devolve  on  agents,  who  will  deceive  them  when  it  is  their 
interest  to  do  so,  as  is  proved  by  abundance  of  examples.  "  Pub- 
lic services,"  says  Smith,  "  are  never  better  performed  than  when 
their  reward  comes  only  in  consequence  of  their  being  performed, 
and  is  proportioned  to  the  diligence  employed  in  performing  them." 
Accordingly,  he  recommends,  that  the  salaries  of  judges  should  be 
paid  at  the  final  determination  of  each  suit,  and  the  share  of  each 
judge  proportioned  to  their  respective  trouble  in  the  progress  of  it. 
This  would  be  some  encouragement  to  the  diligence  of  each  parti- 
cular judge,  as  well  as  to  that  of  the  court,  in  bringing  litigation  to 
an  end.  There  would  be  some  difficulty  in  applying  this  method 
to  all  the  branches  of  the  public  service;  and  it  would  probably 
introduce  as  great  abuses  in  the  opposite  way ;  but  it  would  at  least 
be  productive  of  one  good ;  viz.  preventing  the  needless  multipli- 
cation of  offices.  It  would  likewise  give  the  public  the  same 
advantage  of  competition  as  is  enjoyed  by  individuals,  in  respect  to 
the  services  they  call  for. 

Not  only  are  the  time  and  labour  of  public  men  in  general  better 
paid  for  than  those  of  other  persons,  besides  being  often  wasted  by 
their  own  mismanagement,  without  the  possibility  of  an  efficient 
check;  but  there  is  often  a  further  enormous  waste,  occasioned  by 
compliance  with  the  customs  of  the  country,  and  court  etiquette.  It 
would  be  curious  to  calculate  the  time  wasted  in  the  toilet,  or  to 
estimate,  if  possible,  the  many  dearly-paid  hours  lost,  in  the  course 
of  the  last  century,  on  the  road  between  Paris  and  Versailles. 

Thus,  in  the  governments  of  Asia,  there  is  an  immense  waste  of 
the  time  of  the  superior  public  servants  in  tedious  and  ceremo- 
nious observances.  The  monarch,  after  allowing  for  the  hours  of 
customary  parade,  and  those  of  personal  pleasure,  has  little  time 
left  to  look  after  his  own  affairs,  which,  consequently,  soon  go 
to  ruin.  Frederick  II.  of  Prussia,  by  adopting  a  contrary  line  of 
conduct,  and  by  the  judicious  distribution  and  apportionment  of  his 
time,  contrived  to  get  through  a  great  deal  of  business  himself.  By 
this  means,  he  really  lived  longer  than  older  men  than  himself,  and 
succeeded  in  raising  his  kingdom  to  a  first-rate  power.  His  other 
gieat  qualities,  doubtless,  contributed  to  his  success;  but  they  would 
not  have  been  sufficient,  without  a  methodical  arrangement  of  his 

e. 


CHAP.  VL  ON  CONSUMPTION.  429 

Of  Charges,  Military  and  Naval. 

When  a  nation  has  made  any  considerable  progress  in  commerce, 
manufacture,  and  the  arts,  and  its  products  have,  consequently, 
become  various  and  abundant,  it  would  be  an  immense  inconve- 
nience, if  every  citizen  were  liable  to  be  draggeu  from  a  productive 
employment,  which  has  become  necessary  to  society,  for  the  pur- 
poses cf  national  defence.  The  cultivator  of  the  soil  works  no 
longer  for  the  sustenance  of  himself  and  family  only,  but  also  for 
that  of  many  other  families,  who  are  either  owners  of  the  soil,  and 
share  in  its  produce,  or  traders  and  manufacturers,  that  supply  him 
with  articles  he  cannot  do  without.  He  must,  therefore,  cultivate  a 
larger  extent  of  surface,  must  vary  his  tillage,  keep  a  larger  stock  of 
cattle,  and  follow  a  complex  mode  of  cultivation  that  will  fully 
occupy  his  leisure  between  seed-time  and  harvest.* 

Still  less  can  the  trader  and  manufacturer  afford  thus  to  sacrifice 
time  and  talents,  whereof  the  constant  occupation,  except  during  the 
intervals  of  rest,  is  necessary  to  the  production,  from  which  they  are 
to  derive  their  subsistence. 

The  owners  of  land  let  out  to  farm  may,  undoubtedly,  serve  as 
soldiers  without  pay;  as,  indeed,  the  nobility  and  gentry  do,  in  some 
measure,  in  monarchical  states;  but  they  are,  for  the  most  part,  so 
much  accustomed  to  the  sweets  of  social  existence,  so  little  goaded 
by  necessity  towards  the  conception  and  achievement  of  great  enter- 
prises, and  feel  so  little  of  the  enthusiasm  of  emulation  and  esprit  de 
corps,  that  they  commonly  prefer  a  pecuniary  sacrifice  to  that  of 
comfort,  and  possibly  of  life.  And  these  motives  operate  equally 
with  the  owners  of  capital. 

All  these  reasons  have  led  individuals,  in  most  modern  states,  to 
consent  to  a  taxation,  that  may  enable  the  monarch  or  the  republic 
to  defend  the  country  against  external  violence  with  a  hired  and  pro- 
fessional soldiery,  who  are,  however,- too  apt  to  become  the  tools  of 
their  leader's  ambition  or  tyranny. 

When  war  has  become  a  trade,  it  benefits,  like  all  other  trades, 
from  the  division  .of  labour.  Every  branch  of  human  science  is 
pressed  into  its  service.  Distinction  or  excellence,  whether  in  the 
capacity  of  general,  engineer,  subaltern,  or  even  private  soldier,  can 
not  be  obtained  without  long  training,  perhaps,  and  constant  prac- 
tice. The  nation,  which  should  act  upon  a  different  principle,  would 
lie  under  the  disadvantage  of  opposing  the  imperfection,  to  the  per- 
fection, of  art.  Thus,  excepting  the  cases,  in  which  the  enthusiasm 
of  a  whole  nation  has  been  roused  to  action,  the  advantage  has  uni- 

*  The  Greeks,  until  the  second  Persian  war,  and  the  Romans,  until  the  siege 
if  Veii,  regularly  made  their  military  campaigns  in  that  interval.  Nations  of 
hunters  or '"shepherds,  that  pay  little  attention  to  the  arts,  and  none  to  agriculture, 
like  the  Tartars  and  Arabs,  are  less  circumscribed  in  time,  and  can  prosecute  their 
warlike  enterprises  in  any  quarter,  that  promises  booty,  and  furnishes  pasturage 
Hence  the  vast  area  of  the  conquests  of  Attila,  Genghis  Khan,  and  Tamerlane 
and  of  the  Moors  and  the  Turks. 


430  ON  CONSUMPTION.  BOOK  III. 

formly  been  on  the  side  of  a  disciplined  and  professional  soldiery. 
The  Turks,  although  professing  the  utmost  contempt  for  the  arts  of 
their  Christian  neighbours,  are  compelled  by  the  dread  of  extermi- 
nation, to  be  their  scholars  in  the  art  of  war.  The  European  powers 
were  all  forced  to  adopt  the  military  tactics  of  the  Prussians;  and, 
when  the  violent  agitation  of  the  French  revolution  pressed  every 
resource  of  science  to  the  aid  of  the  armies  of  the  republic,  the  ene- 
mies of  France  were  obliged  to  follow  the  example. 

This  extensive  application  of  science,  and  adaptation  of  fresh 
means  and  more  ample  resources  to  military  purposes,  have  made 
war  far  more  expensive  now  than  in  former  times.  It  is  necessary 
now-a-days,  to  provide  an  army  beforehand,  with  supplies  of  arms, 
ammunition,  magazines  of  provision,  ordnance,  &c.,  equal  to  the  con- 
sumption of  one  campaign  at  the  least.  The  invention  of  gunpowder 
has  introduced  the  use  of  weapons  more  complex  and  expensive,  and 
very  chargeable  in  the  transport,  especially  the  field  and  battering 
trains.  Moreover,  the  wonderful  improvement  of  naval  tactics,  the 
variety  of  vessels  of  every  class  and  construction,  all  requiring  the 
utmost  exertion  of  human  genius  and  industry;  the  yards,  docks, 
machinery,  store-houses,  &c.  have  entailed  upon  nations  addicted  to 
war  almost  as  heavy  an  expense  in  peace,  as  in  times  of  actual  hos- 
tility ;  and  obliged  them  not  only  to  expend  a  great  portion  of  their 
income,  but  to  vest  a  great  amount  of  capital  likewise  in  military 
establishments.  In  addition  to  which,  it  is  to  be  observed,  that  the 
modern  colonial  system,  that  is  to  say,  the  system  of  retaining  the 
sovereignty  of  towns  and  provinces  in  distant  parts  of  the  world, 
has  made  the  European  states  open  to  attack  and  aggression  in  the 
most  remote  quarters  of  the  globe,  and  the  whole  world  the  theatre 
of  warfare,  when  any  of  the  leading  powers  are  the  belligerents.* 

Wealth  has,  consequently,  become  as  indispensable  as  valour  to 
the  prosecution  of  modern  warfare ;  and  a  poor  nation  can  no  longer 
withstand  a  rich  one.  Wherefore,  since  wealth  can  be  acquired 
only  by  industry  and  frugality,  it  may  safely  be  predicted,  that 
every  nation,  whose  agriculture,  manufacture,  and  commerce,  shall 
be  ruined  by  bad  government,  or  exorbitant  taxation,  must  infallibly 
fall  under  the  yoke  of  its  more  provident  neighbours.  We  may 
further  conclude,  that  henceforward  national  strength  will  accom- 
pany national  science  and  civilization ;  fop  none  but  civilized  nations 
can  maintain  considerable  standing  armies ;  so  that  there  is  no  reason 
to  apprehend  the  future  recurrence  of  those  sudden  overthrows  of 
civilized  empires  by  the  influx  of  barbarous  tribes,  of  which  history 
affords  many  examples. 

War  costs  a  nation  more  than  its  actual  expense;  it  costs  besides, 
all  that  would  have  been  gained,  but  for  its  occurrence. 

When  Louis  XIV.  in  1672,  resolved  in  a  fit  of  passion,  to  chas- 

*  It  has  been  calculated  that  every  soldier,  brought  into  the  field  by  Great 
Britain,  during  her  last  war  with  America,  cost  her  twice  as  much  as  one  on  the 
continent  of  Europe.  And  the  other  charges  of  warfare  must  of  course  be  ag- 
gravated by  the  distance  in  an  equal  ratio. 


CHAP.  VL  ON  CONSUMPTION.  43] 

tise  the  Dutch  for  the  insolence  of  their  newspaper  writers,  Boreel. 
the  Dutch  ambassador,  laid  before  him  a  memorial  showing  that 
France  through  the  medium  of  Holland,  sold  produce  annually  to 
foreign  nations,  to  the  amount  of  sixty  millions  />.  at  the  then  scale 
of  price;  which  will  fall  little  short  of  120  millions  (22,000,000  of 
dollars)  at  the  present.  But  the  court  treated  his  representations  as 
the  mere  empty  bravado  of  an  ambassador. 

To  conclude:  the  charges  of  war  would  be  very  incorrectly  esti- 
mated, were  we  to  take  no  account  of  the  havoc  and  destruction  it 
occasions ;  for  that  one  at  least  of  the  belligerents,  whose  territory 
happens  to  be  the  scene  of  operations,  must  be  exposed  to  its 
ravages.  The  more  industrious  the  nation,  the  more  does  it  suffer 
from  warfare.  When  it  penetrates  into  a  district  abounding  in  agri- 
cultural, manufacturing,  and  commercial  establishments,  it  is  like  a 
fire  in  a  place  full  of  combustibles;  its  fury  is  aggravated,  and  the 
devastation  prodigious.  Smith  calls  the  soldier  an  unproductive 
labourer ;  would  to  God  he  were  nothing  more,  and  not  a  destruc- 
tive one  into  the  bargain !  he  not  only  adds  no  product  of  his  own  (a) 
to  the  general  stock  of  wealth,  in  return  for  the  necessary  subsist- 
ence he  consumes,  but  is  often  set  to  work  to  destroy  the  fruits  of 
other  people's  labour  and  toil,  without  doing  himself  any  benefit. 

The  tardy,  but  irresistible  expansion  of  intelligence  will  probably 
operate  a  still  further  change  in  external  political  relations,  and  with 
it  a  prodigious  saving  of  expenditure  for  the  purposes  of  war. 
Nations  will  be  taught  to  know  that  they  have  really  no  interest  in 
fighting  one  another;  that  they  are  sure  to  suffer  all  the  calamities 
incident  to  defeat,  while  the  advantages  of  success  are  altogether 
illusory.  According  to  the  international  policy  of  the  present  day, 
the  vanquished  are  sure  to  be  taxed  by  the  victor,  and  the  victor  by 
domestic  authority:  for  the  interest  of  loans  must  be  raised  by  tax- 
ation. There  is  no  instance  on  record,  of  any  diminution  of 
national  expenditure  being  effected  by  the  most  successful  issue  of 
hostilities.  And,  what  is  the  glory  it  can  confer  more  than  a  mere 
toy  of  the  most  extravagant  price,  that  can  never  even  amuse 
rational  minds  for  any  length  of  time?  Dominion  by  land  or  sea 
will  appear  equally  destitute  of  attraction,  when  it  comes  to  be 
generally  understood,  that  all  its  advantages  rest  with  the  rulers,  and 
that  the  subjects  at  large  derive  no  benefit  whatever.  To  private 
individuals,  the  greatest  possible  benefit  is  entire  freedom  of  inter- 
course, which  can  hardly  be  enjoyed  except  in  peace.  Nature 
prompts  nations  to  mutual  amity;  and,  if  their  governments  take 
upon  themselves  to  interrupt  it,  and  engage  them  in  hostility,  they 
are  equally  inimical  to  their  own  people,  and  to  those,  they  wa. 
against.  If  their  subjects  are  weak  enough  to  second  the  ruinous 
vanity  or  ambition  of  their  rulers  in  this  propensity,  I  know  not 

(a)  This  is  too  generally  expressed.  Where  security  from  external  attack  is 
only  to  he  had  by  means  of  a  professional  soldiery,  the  soldier  is  a  productive 
Agent— productive  of  the  immaterial  product,  security  from  external  attack,  thai, 
which,  under  certain  circumstances,  none  can  be  more  valuable.  T. 


432  ON  CONSUMPTION.  BOOK  TIL 

now  to  distinguish  such  egregious  folly  and  absurdity,  from  that  of 
the  brutes  that  are  trained  to  fight  and  tear  each  other  to  pieces,  for 
the  mere  amusement  of  their  savage  masters. 

But  human  intelligence  will  not  stand  still ;  the  same  impulse  lhat 
has  hitherto  borne  it  onwards,  will  continue  to  advance  it  yet  further.* 
The  very  circumstance  of  the  vast  increase  of  expense  attending 
national  warfare  has  made  it  impossible  for  governments  henceforth 
to  engage  in  it,  without  the  public  assent,  express  or  implied ;  and 
that  assent  will  be  obtained  with  the  more  difficulty,  in  proportion  as 
the  public  shall  become  more  generally  acquainted  with  their  real 
interest.  The  national  military  establishment  will  be  reduced  to 
what  is  barely  sufficient  to  repel  external  attack ;  for  which  purpose 
little  more  is  necessary,  than  a  small  body  of  such  kinds  of  troops  as 
can  not  be  had  without  long  training  and  exercise;  as  of  cavalry  and 
artillery.  For  the  rest,  nations  will  rely  on  their  militia,  and  on  the 
excellence  of  their  internal  polity:  for  it  is  next  to  impossible  to 
conquer  a  people  unanimous  in  their  attachment  to  their  national 
institutions ;  and  their  attachment  will  always  be  proportionate  to 
the  loss  they  will  incur  by  a  change  of  domination.! 

Of  the  Charges  of  Public  Instruction. 

Two  questions  have  been  raised  in  political  economy;  1.  Whether 
the  public  be  interested  in  the  cultivation  of  science  in  all  its 
branches  1  2.  Whether  it  be  necessary,  that  the  public  should  be  af 
the  expense  of  teaching  those  branches,  it  has  an  interest  in  cultivat 
ing  ? 

Whatever  be  the  position  of  man  in  society,  he  is  in  constant  de- 
pendence upon  the  three  kingdoms  of  nature.  His  food,  his  clothing, 
his  medicines,  every  object  either  of  business  or  of  pleasure,  is  sub 
ject  to  fixed  laws;  and  the  better  those  laws  are  understood,  the 
more  benefit  will  accrue  to  society.  Every  individual,  from  tho 
common  mechanic,  that  works  in  wood  or  clay,  to  the  prime  minis- 
ter that  regulates  with  the  dash  of  his  pen  the  agriculture,  the  breed- 
ing of  cattle,  the  mining,  or  the  commerce  of  a  nation,*  will  perform 
his  business  the  better,  the  better  he  understands  the  nature  of  things, 
and  the  more  his  understanding  is  enlightened. 

For  this  reason,  every  advance  of  science  is  followed  by  an  in- 

*  Those  who  deny  the  progressive  influence  of  human  reason  must  have 
studied  history  to  very  little  purpose.  The  perfidy  and  cruelty  of  war  have  con- 
siderably abated,  in  Europe,  more  than  in  Asia  or  America,  and  most  of  all 
amongst  the  most  polished  of  the  European  nations.  The  ungenerous  character 
of  some  recent  military  enterprises  roused  so  much  public  indignation,  as  to 
make  them  recoil  upon  the  projectors  with  ruinous  violence. 

f  I  am  here  speaking  of  the  only  sure  reliance  in  an  enlightened  age.  A  pen- 
pie,  that  has  nothing  to  lose  by  a  change  of  domination,  may  defend  itself  with 
the  most  determined  gallantry.  The  Mussulman  will  rush  on  certain  destruc- 
tion, in  defence  of  a  prince  and  a  faith,  that  are  neither  of  them  worth  defending. 
ftut  political  and  religious  prejudice  will  sooner  or  later  fall  to  the  ground;  :tnd 
•nave  mankind  to  seek  for  some  more  reasonable  object  of  devotion. 


CHAP.  VL  ON  CONSUMPTION.  433 

crease  of  social  happiness.  A  new  application  of  the  lever,  or  of  the 
power  of  wind  or  water,  or  even  a  method  of  reducing  the  friction 
of  bodies,  will,  perhaps,  have  an  influence  on  twenty  different  arts. 
An  uniformity  of  weights  and  measures,  arranged  upon  mathematical 
principles,  would  be  a  benefit  to  the  whole  commercial  world,  if  it 
were  wise  enough  to  adopt  such  an  expedient.  An  important  dis- 
covery in  astronomy  or  geology  may  possibly  afford  the  means  of 
ascertaining  the  longitude  at  sea  with  precision,  which  would  be  an 
immense  advantage  to  navigation  all  over  the  world.  The  naturali- 
sation in  Europe  of  a  new  botanical  genus  or  species  might  possibly 
influence  the  comfort  of  many  millions  of  individuals.* 

Among  the  numerous  classes  of  science,  theoretical  and  practical, 
which  it  is  the  interest  of  the  public  to  advance  and  promote,  there 
are  fortunately  many,  that  individuals  have  a  personal  interest  in 
pursuing,  and  which  the  public,  therefore,  is  not  called  upon  to  pay 
the  expense  of  teaching.  Every  adventurer  in  any  branch  of  indus- 
try is  urged  most  strongly  by  self-interest  to  learn  his  business  and 
whatever  concerns  it.  The  journeyman  gains  in  his  apprenticeship, 
besides  manual  dexterity,  a  variety  of  notions  and  ideas  only  to  be 
learnt  in  the  work-shop,  and  which  can  be  no  otherwise  recompensed, 
than  by  the  wages  he  will  receive. 

But  it  is  not  every  degree  or  class  of  knowledge,  that  yields  a 
benefit  to  the  individual,  equivalent  to  that  accruing  to  the  public. 
In  treating  abovef  of  the  profits  of  the  man  of  science,  I  have  shown 
the  reason,  why  his  talents  are  not  adequately  remunerated;  yet 
theoretical  is  quite  as  useful  to  society  as  practical  knowledge;  for 
how  could  science  ever  be  applied  to  the  practical  utility  of  mankind, 
unless  it  were  discovered  and  preserved  by  the  theorist?  It  would 
rapidly  degenerate  into  mere  mechanical  habit,  which  must  soon 
decline ;  and  the  downfall  of  the  arts  would  pave  the  way  for  the 
return  of  ignorance  and  barbarism. 

In  every  country  that  can  at  all  appreciate  the  benefits  to  be  de- 
rived from  the  enlargement  of  human  faculties,  it  has  been  deemed 
by  no  means  a  piece  of  extravagance,  to  support  academies  and 
learned  institutions,  and  a  limited  number  of  very  superior  schools, 
intended  not  as  mere  repositories  of  science,  and  of  the  most  approved 
mode  of  instruction,  but  as  a  means  of  its  still  further  extension. 
But  it  requires  some  skill  in  the  management,  to  prevent  such  esta- 
blishments from  operating  as  an  impediment,  instead  of  a  further- 
ance, to  the  progress  of  knowledge,  and  as  an  obstruction  rather  than 
as  an  avenue  to  the  improvement  of  education.  Long  before  the 
revolution,  it  had  become  notorious,  that  most  of  our  French  univer- 
sities had  been  thus  perverted  from  the  intention  of  their  founders. 

*  Should  the  expected  success  attend  the  attempt  to  naturalise  in  Europe  the 
flax  of  New  Zealand,  which  is  greatly  superior  to  that  of  Europe  in  the  length 
and  delicacy  of  the  fibre,  as  well  as  in  the  abundance  of  the  crop,  it  is  possibis 
that  fine  linon  may  be  produced  at  the  rate  now  paid  for  the  coarsest  quality; 
which  would  greatly  improve  the  cleanliness  and  health  of  the  lower  classes 

f  Bmk  II.  chap.  7.  sect  2. 

37  3E 


434  ON  CONSUMPTION.  BOOK  III. 

All  the  principal  discoveries  were  made  elsewhere;  and  most  of 
them  had  to  encounter  the  weight  of  their  influence  over  the  rising 
generation  and  credit  with  men  in  power.*  (1) 

From  this  example,  we  may  see  how  dangerous  it  is,  to  entrust 
them  with  any  discretionary  control.  If  a  candidate  presents  him- 
self for  examination,  he  must  not  be  referred  to  teachers,  who  are 
at  the  same  time  judges  and  interested  parties,  sure  to  think  well  of 
their  own  scholars,  and  ill  of  those  of  every  body  else.  The  merit 
of  the  candidate  should  alone  decide,  and  not  the  place  where  he 
happens  to  have  studied,  nor  the  length  of  his  probation;  for  to  oblige 
a  student  in  any  science,  medicine  for  instance,  to  learn  it  at  a  par- 
ticular place,  is,  possibly,  to  prevent  his  learning  it  better  elsewhere; 
and,  to  prescribe  any  fixed  routine  of  study,  is,  possibly,  to  prevent 
his  fixing  a  shorter  road.  Moreover,  in  deciding  upon  comparative 
merit,  there  is  much  unfairness  to  be  apprehended  from  the  esprit  de 
corps  df  such  communities. 

Encouragement  may,  with  perfect  safety,  be  held  out  to  a  mode 
of  instruction  of  no  small  efficacy ;  I  mean,  the  composition  of  good 
elementary!  works.  The  reputation  and  profit  of  a  good  book  in 

*What  was  denominated  an  University,  under  the  reign  of  Napoleon,  was  a 
still  more  mischievous  institution ;  being,  in  fact,  but  a  most  expensive  and  vexa- 
tious contrivance,  for  depraving  the  intellectual  faculties  of  the  rising  genera- 
tion, by  substituting,  in  the  place  of  just  and  correct  notions  of  things,  opinions 
calculated  to  perpetuate  the  political  slavery  of  their  country. 

f  Under  this  head,  I  would  include,  the  fundamental  parts  of  knowledge  in 
every  department,  and  the  familiar  instruction  adapted  to  each  specific  calling, 
respectively ;  such  as  would  impart  at  a  cheap  rate  to  the  hatter,  the  metal- 
founder,  the  potter,  the  dyer,  &c.,  the  general  principles  of  their  respective  arts. 
Works  of  this  kind  keep  up  a  constant  channel  of  communication  between  t)>e 
practical  and  theoretical  branches,  and  enable  them  to  profit  mutually  by  each 
other's  experience. 

(1)  ["  It  is  chiefly,"  observes  DUGALD  STEWART,  "  in  judging  of  questiom 
coming  home  to  their  business  and  bosoms,  that  casual  associations  lead  mankind 
astray ;  and  of  such  associations,  how  incalculable  is  the  number  arising  from 
false  systems  of  religion,  oppressive  forms  of  government,  and  absurd  plans  ot' 
education.  The  consequence  is,  that  while  the  physical  and  mathematical  dis- 
coveries of  former  ages  present  themselves  to  the  hand  of  the  historian,  like 
masses  of  pure  and  native  gold,  the  truths  which  we  are  here  in  quest  of  may  be 
compared  to  iron,  which  although  at  once  the  most  necessary  and  the  most  widely 
diffused  of  all  the  metals,  commonly  requires  a  discriminating  eye  to  detect  its 
existence,  and  a  tedious  as  well  as  nice  process,  to  extract  it  from  the  ore." 

"  To  the  same  circumstance  it  is  owing,  that  improvements  in  Moral  and  m 
Political  Science  do  not  strike  the  imagination  with  nearly  so  great  force  as  the 
discoveries  of  the  Mathematician  or  of  the  Chemist.  When  an  inveterate  preju- 
dice is  destroyed  by  extirpating  the  casual  associations  on  which  it  was  grafted, 
how  powerful  is  the  new  impulse  given  to  the  intellectual  faculties  of  man ! 
Yet  how  slow  and  silent  the  process  by  which  the  effect  is  accomplished ! 
Were  it  not,  indeed,  for  a  certain  class  of  learned  authors,  who,  from  time  to 
time,  heave  the  log  into  the  deep,  we  should  hardly  believe  that  the  reason  of 
Jhe  species  is  progressive.  In  this  respect,  the  religious  and  academical  estab- 
lishments in  some  parts  of  Europe  are  not  without  their  use  to  the  historian 
of  tno  human  mind.  Immovably  moored  to  the  same  station  by  the  strength  of 


CHAP.  VL  ON  CONSUMPTION.  435 

this  class  do  not  indemnify  the  labour,  science,  antf  skill,  requisite  to 
its  composition,  (a)  A  man  must  be  a  fool  to  serve  the  public  in  this 
line  where  the  natural  profit  is  so  little  proportioned  to  the  benefit 
derived  to  the  public.  The  want  of  good  elementary  books  will 
never  be  thoroughly  supplied,  until  the  public  shall  hold  out  tempta- 
tions, sufficiently  ample  to  engage  first-rate  talents  in  their  compo- 
sition. It  does  not  answer  to  employ  particular  individuals  for  the 
express  purpose ;  for  the  man  of  most  talents  will  not  always  suc- 
ceed the  best:  nor  to  offer  specific  premiums;  for  they  are  often 
bestowed  on  very  imperfect  productions,  and  the  encouragement 
ceases  the  moment  the  premium  is  awarded.  But  merit  in  this  kind 
should  be  paid  proportionately  to  its  degree,  and  always  liberally. 
A  good  work  will  thus  be  sure  to  be  superseded  by  a  better,  till  per- 
fection is  at  last  attained  in  each  class.  And  I  must  observe,  by  the 
way,  that  there  is  no  great  expense  incurred  by  liberally  rewarding 
excellence ;  for  it  must  always  be  extremely  rare ;  and  what  is  a 
great  sum  to  an  individual,  is  a  small  matter  to  the  pockets  of  a 
nation. 

These  are  the  kinds  of  instruction  most  calculated  to  promote 
national  wealth,  and  most  likely  to  retrograde,  if  not  in  some  measure 
supported  by  the  public.  There  are  others,  which  are  essential  to 
the  softening  of  national  manners,  and  stand  yet  more  in  need  of 
that  support. 

When  the  useful  arts  have  arrived  at  a  high  degree  of  perfection, 
and  labour  has  been  very  generally  and  minutely  subdivided,  the 
occupation  of  the  lowest  classes  of  labourers  is  reduced  to  one  or  two 
operations,  for  the  most  part  simple  in  themselves,  and  continually 
repeated:  to  these  their  whole  thought  and  attention  are  directed; 
and  from  them  they  are  seldom  diverted  by  any  novel  or"  unforeseen 
occurrence:  their  intellectual  faculties,  being  rarely  or  never  called 
into  play,  must  of  course  be  degraded  and  brutified,  and  themselves 
rendered  incapable  of  uttering  two  words  of  common  sense  out  of 
their  peculiar  line  of  business,  and  utterly  devoid  of  any  generous 
ideas  or  elevated  notions.  Elevation  of  mind  is  generated  by  enlarg- 
ed views  of  men  and  things,  and  can  never  exist  in  a  being  incapa- 
ble of  conceiving  the  general  bearings  and  connexions  of  objects.  A 
plodding  mechanic  can  conceive  no  connexion  between  the  inviola- 
bility of  property  and  public  prosperity,  or  how  he  can  be  more 
interested  in  that  prosperity,  than  his  more  wealthy  neighbour;  but 
is  apt  to  consider  all  these  important  benefits  as  so  many  encroach- 
ments on  his  rights  and  happiness.  A  certain  degree  of  education, 

(a)  This  can  only  be  true  where  the  demand  for  such  works  is  limited.  In 
England,  works  of  instruction  are  probably  amongst  the  most  profitable  to  the 
authors.  T. 

their  cables,  and  the  weight  of  their  anchors,  they  enable  him  to  measure  Ihe 
rapidity  of  the  current  by  which  the  rest  of  the  world  are  borne  along." 

Vide  P^  eface  to  Stewart's  Dissertations,  p.  28,  Boston  edition.} 

AMERICAN  EDITOR 


436  ON  CONSUMPTION.  BOOK  III. 

of  reading,  of  reflection  while  at  work,  and  of  intercourse  with  per- 
sons of  his  own  condition,  will  open  his  mind  to  these  conceptions, 
as  well  as  introduce  a  little  more  delicacy  of  feeling  into  his  conduct, 
as  a  father,  a  husband,  a  brother,  or  a  citizen. 

But,  in  the  vast  machinery  of  national  production,  the  mere  ma- 
nual labourer  is  so  placed,  as  to  earn  little  or  nothing  more  than  a 
bare  subsistence.  The  most  he  can  do  is,  to  rear  his  young  family, 
and  bring  them  up  to  some  occupation :  he  cannot  be  expected  to 
give  them  that  education,  which  we  have  supposed  the  well-being  of 
society  to  require.  If  the  community  wish  to  have  the  benefit  of 
more  knowledge  and  intelligence  in  the  labouring  classes,  it  must 
dispense  it  at  the  public  charge. 

This  object  may  be  obtained  by  the  establishment  of  primary 
schools,  of  reading,  writing,  and  arithmetic.  These  are  the  ground- 
work of  all  knowledge,  and  are  quite  sufficient  for  the  civilization  of 
the  lower  classes.  In  fact,  one  can  not  call  a  nation  civilized,  nor 
consequently  possessed  of  the  benefits  of  civilization,  until  the  peo- 
ple at  large  be  instructed  in  these  three  particulars :  till  then  it  will 
be  but  partially  reclaimed  from  barbarism.  With  the  help  of  these 
advantages  alone,  it  may  safely  be  affirmed,  that  no  transcendent  ge- 
nius or  superior  mind  will  long  remain  in  obscurity,  or  be  prevented 
from  displaying  itself  to  the  infinite  benefit  of  the  community. 
The  faculty  of  reading  alone,  will,  for  a  few  dollars,  put  a  man  in  pos- 
session of  all  that  eminent  men  have  said  or  done,  in  the  line  to 
which  the  bent  of  genius  impels.  Nor  should  the  female  part  of  the 
creation  be  shut  out  from  this  elementary  education ;  for  the  public 
is  equally  interested  in  their  civilization ;  and  they  are  indeed  the 
first,  and  often  the  only  teachers  of  the  rising  generation. 

It  would  be  the  more  unpardonable  in  governments  to  neglect  the 
business  of  education,  and  abandon  to  their  present  ignorance  the 
great  majority  of  the  population  in  those  nations  of  Europe,  that 
pretend  to  the  character  of  refinement  and  civilization,  now  that  the 
improved  methods  of  mutual  instruction,  that  have  been  tried  with 
such  complete  success,  afford  a  ready  and  most  economical  means  of 
universally  diffusing  knowledge  amongst  the  inferior  classes.* 

*  According  to  the  new  method,  introduced  by  Lancaster,  and  perfected  by 
subsequent  teachers,  a  single  master  with  very  little  aid  of  books,  pens,  or  paper, 
can  rapidly  and  effectually  teach  reading,  writing,  and  vulgar  arithmetic,  to  five 
or  six  hundred  scholars  at  a  time.  This  truly  economical  result  is  produced, 
by  taking  advantage  of  the  slightest  superiority  of  intelligence  of  one  above 
another,  and  directing  the  motive  of  emulation,  natural  to  the  human  breast, 
towards  an  useful  object.  A  large  school  is  commonly  divided  into  forms,  con- 
sisting each  of  eight  children,  as  nearly  equal  in  advancement  as  possible,  and 
instructed  by  a  child  somewhat  more  advanced,  called  the  Monitor.  These 
forms  again  are  divided  into  eight  classes ;  of  which  the  lowest  learns  to  pro- 
nounce the  letters  of  the  alphabet,  and  to  trace  their  figures  rudely  with  the 
finger  upon  sand  spread  out  upon  a  flat  board ;  and  the  highest  is  able  to  write  upon 
paper,  and  to  practise  the  four  rules  of  arithmetic.  The  children  of  each  form 
sre  ranged  according  to  their  progress;  and  whoever  cannot  give  the  answer,  is 
'inrnediatelj  superseded  by  a  more  apt  scholar.  As  soon  as  a  child  is  pe-f'ected 
ia  vne  class.,  he  is  tiansferred  to  the  next  in  degree.  The  lessons  are  received. 


VL  ON  CONSUMPTION.  437 

Thus,  none  but  elementary  and  abstract  science, — the  highest  and 
the  lowest  branches  of  knowledge,  are  so  much  less  favoured  in  the 
natural  course  of  things,  and  so  little  stimulated  by  the  competition 
of  demand,  as  to  require  the  aid  of  that  authority,  which  is  created 
purposely  to  watch  over  the  public  interests.  Not  that  individuals 
have  no  interest  in  the  support  and  promotion  of  these,  as  well  as  of 
the  other,  branches  of  knowledge ;  but  they  have  not  so  direct  an 
interest, — the  loss  occasioned  by  their  disappearance  is  neither  so 
immediate  nor  so  perceptible ;  a  flourishing  empire  might  retrograde, 
until  it  reached  the  confines  of  barbarism,  before  individuals  had 
observed  the  operating  cause  of  its  decline. 

I  would  not  be  understood  to  find  fault  with  public  establishments 
for  purposes  of  education,  in  other  branches  than  those  I  have  been 
describing.  I  am  only  endeavouring  to  show,  in  what  branches  a 
nation  may  wisely,  and  with  due  regard  to  its  own  interest,  defray 
the  charge  out  of  the  public  purse.  Every  diffusion  of  such  know- 
ledge, as  is  founded  upon  fact  and  experience,  and  does  not  proceed 
upon  dogmatical  opinions  and  assertions,  every  kind  of  instruction, 
that  tends  to  improve  the  taste  and  understanding,  is  a  positive  good  ; 
and,  consequently,  an  institution  calculated  to  diffuse  it  must  be  ben- 
eficial. But  care  must  be  taken,  that  encouragement  of  one  branch 
shall  not  operate  to  discourage  another.  This  is  the  general  mis- 
chief of  premiums  awarded  by  the  public ;  a  private  teacher  or  in- 
stitution will  not  be  adequately  paid,  where  the  same  kind  of  in- 
struction is  to  be  had  for  nothing,  though,  perhaps,  from  inferior 
teachers.  There  is,  therefore,  some  danger,  that  talent  may  be 
superseded  by  mediocrity;  and  a  check  be  given  to  private  exertions, 
from  which  the  resources  of  the  state  might  expect  incalculable 
benefit. 

The  only  important  science,  which  seems  to  me  not  susceptible 
of  being  taught  at  the  public  charge,  is  that  of  moral  philosophy, 
which  may  be  considered  as  either  experimental  or  doctrinal.  The 
former  consists  in  the  knowledge  of  moral  qualities,  and  of  the 
chain  of  connexion  between  events  dependent  upon  human  will; 
and  forms  indeed  a  part  of  the  study  of  man,  which  is  best  pursued 
by  social  converse  and  intercourse.  The  latter  is  a  series  of  max- 
ims and  precepts,  possessing  very  little  influence  upon  human  con- 
duct, which  is  best  guided  in  the  relations  of  public  and  of  private 
life,  by  the  operation  of  good  laws,  of  good  education,  and  of  good 

example.*  ______^_ 

sometimes  in  a  sitting  posture,  and  sometimes  upright,  with  slates  affixed  to  the 
walls.  The  instruction  is  thus  always  accommodated  to  the  age  .and  faculties  of 
the  child ;  it  necessarily  arrests  and  rewards  his  attention ;  and  involves  that 
personal  activity,  essential  to  the  infant  frame.  The  whole  is  conducted  in  a 
single  apartment,  and  usually  under  the  superintendence  of  a  single  ma«ter  ot 
mistress.  The  general  adoption  of  this  method  will  probably  be  for  some  timo 
>>pposed  by  custom  and  prejudice;  but  its  utility  and  conformity  to  the  order  ot 
nature  will  ensure  its  ultimate  and  universal  prevalence. 

*  I  am  strongly  disposed  to  say  the  same  of  logic.  Were  nothing  taught,  but 
i  fhat  is  consistent  with  truth  and  good  sense,  logic  would  follow  of  iteelf  as  a 
37* 


438  ON  CONSUMPTION.  BOOK  IIT. 

The  sole  encouragement  to  virtue  and  good  conduct,  th;;t  can  be 
relied  on,  is,  the  interest  that  every  body  has  in  discovering  and  em- 
ploying no  persons  but  those  of  good  character.  Men  the  most  in- 
dependent in  their  circumstances  want  something  more  to  make 
them  happy;  that  is  to  say,  the  general  esteem  and  good  opinion  of 
their  fellow-creatures ;  and  these  can  only  be  acquired  by  putting 
on  the  appearance  at  least  of  estimable  qualities,  which  it  is  much 
easier  to  acquire  than  to  simulate.  The  influence  of  the  sovereign 
or  ruling  body,  upon  the  manners  of  the  nation,  is  very  extensive, 
because  it  employs  a  vast  number  of  people  ;  but  it  operates  bss  ben- 
eficially than  that  of  individuals,  because  it  is  less  interested  in  em- 
ploying none  but  persons  of  integrity.  If  to  its  luke  warn  mess  in 
this  particular  be  added,  the  example  of  immorality  and  contempt 
for  honesty  and  economy  too  frequently  held  out  to  people  by  their 
rulers,  the  corruption  of  national  morals  will  be  wonderfully  accele- 
rated.* But  a  nation  may  be  rescued  from  moral  degradaton  by 
the  re-action  of  opposite  causes.  Colonies  are,  for  the  most  part, 
composed  of  by  no  means  the  most  estimable  classes  of  the  mother- 
country  :  in  a  very  short  time,  however,  when  the  hopes  of  return 
are  wholly  abandoned,  and  the  settlers  have  made  up  their  minds 
to  pass  the  rest  of  their  lives  in  their  new  abode,  they  gradual 'y  feel 
the  necessity  of  conciliating  the  esteem  of  their  fellow-citizens,  and 
the  morals  of  the  colony  improve  rapidly.  By  morals,  I  mean  the 
general  course  of  human  conduct  and  behaviour. 

These  are  the  causes,  that  have  a  positive  influence  upon  national 
morality.  To  these  must  be  added,  the  effect  of  education  in  gene- 
ral, in  opening  the  eyes  of  mankind  to  their  real  interests,  and  soft- 
ening the  temper  and  disposition. 

Religious  instruction  ought,  strictly  speaking,  to  be  defraye  \  by 
the  respective  religious  communions  and  societies,  each  of  \A  hich 
regards  the  opinions  of  the  rest  as  heretical,  and  naturally  revo  ts  at 
the  injustice  of  contributing  to  the  propagation  of  what  it  d»  ems 
erroneous,  if  not  criminal. 

Of  the  Charges  of  Public  Benevolent  Institutions. 

It  has  been  much  debated,  whether  individual  distress  has  any 
title  to  public  relief.  I  should  say  none,  except  inasmuch  as  it  is 
an  unavoidable  consequence- of  existing  social  institutions.  If  ir.fir- 

matter  of  course:  all  the  teaching  in  the  world  will  never  make  a  man  a  good 
reasoner,  whose  notions  and  ideas  of  things  are  unsound  and  erroneous  ;  und, 
with  the  foundation  of  just  notions,  he  will  require  no  teaching  to  make  him 
reason  well.  Just  ideas  of  things  are  only  to  be  acquired  by  attentive  examina- 
tion; by  taking  account  of  every  particular  concerning  them,  and  of  nothing  but 
what  concerns  them ;  which  is  the  object  of  all  knowledge  in  general,  and  by  no 
means  of  logic  alone. 

*  The  bad  example  of  a  vicious  prince  is  of  the  most  fatal  tendency  ;  it  is  noto- 
rious to  all  the  world,  and  protected  and  abetted  by  public  authority  ;  and  it  is 
sure  to  be  reflected  by  the  subservience  of  courtiers  to  the  extreme  point  of  init- 
iative servility 


CHAP.  VL  ON  CONSUMPTION.  439 

mily  and  want  be  the  effect  of  the  social  system,  they  have  a  title 
to  public  relief:  provided  always,  that  it  be  shown,  that  the  same 
system  affords  no  means  of  prevention  or  cure.  But  it  would  be 
foreign  to  the  matter  to  discuss  the  question  of  right  in  this  place. 
All  we  need  do  is,  to  consider  benevolent  institutions  with  regard  to 
their  nature  and  consequences. 

When  a  community  establishes  at  the  public  charge  any  institu- 
tion for  benevolent  purposes,  it  forms  a  kind  of  saving-bank,  to 
which  every  member  contributes  a  portion  of  his  revenue,  to  entitle 
him  to  claim  a  benefit,  in  the  event  of  accident  or  misfortune.  The 
wealthy  are  generally  impressed  with  an  idea,  that  they  shall  never 
stand  in  need  of  public  charitable  relief;  but  a  little  less  confidence 
would  become  them  better.  No  man  can  reckon  in  his  own  case 
upon  the  continuance  of  good  fortune,  with  as  much  certainty  as 
upon  the  permanence  of  wants  and  infirmities;  the  former  may  desert 
him;  but  the  latter  are  inseparable  companions.  It  is  enough  to 
know,  that  good  fortune  is  not  inexhaustible,  to  infuse  an  apprehen- 
sion that  it  may  some  day  or  other  be  exhausted :  one  has  but  to 
look  round,  and  this  apprehension  will  be  confirmed  by  the  experi- 
ence of  numbers,  whose  misfortunes  were  to  themselves  quite  unex- 
pected. 

Hospitals  for  the  sick,  almshouses  and  asylums  for  old  age  and 
infancy,  inasmuch  as  they  partially  relieve  the  poorer  classes  from 
the  charge  of  maintaining  those  who  are  naturally  dependent  on 
them,  and  thereby  to  allow  population  to  advance  somewhat  more 
rapidly,  have  a  natural  tendency  a  little  to  depress  the  wages  of 
labour.  That  depression  would  be  greater  still,  if  such  establish- 
ments should  be  so  multiplied,  as  to  take  in  all  the  sick,  aged,  and 
infants  of  those  classes,  who  would  then  have  none  but  themselves 
to  provide  for  out  of  their  wages.  If  they  were  entirely  done  away, 
there  would  be  some  rise  of  wages,  although  not  sufficient  to  main- 
tain so  large  a  labouring  population,  as  may  be  kept  up  with  their 
help ;  for  the  demand  for  their  labour  would  be  somewhat  reduced 
by  the  advance  of  its- price. 

From  these  two  extreme  suppositions,  we  may  judge  of  the  effect 
of  those  efforts  to  relieve  indigence,  which  all  nations  have  made  in 
some  degree  or  other ;  and  see  the  reason,  why  the  distress  and 
relief  go  on  increasing  together,  although  not  exactly  in  the  same 
ratio. 

Most  nations  preserve  a  middle  course  between  the  two  extremes, 
affording  public  relief  to  a  part  only  of  those,  who  are  helpless  from 
age,  infancy,  or  casual  sickness.  Of  the  rest  they  endeavour  to  lid 
themselves  in  one  of  two  ways  ;  either  by  requiring  certain  qualifi- 
cations in  the  applicants,  whether  of  age,  of  specific  disease,  or, 
perhaps,  of  mere  interest  and  favouritism  ;  or  by  limiting  narrowly 
the  extent  of  the  relief,  giving  it  upon  hard  terms  to  the  applicants, 
or  attaching  some  degree  of  shame  to  the  acceptance.* 

*At  Paris,  the  limitation  of  relief  afforded  by  the  Hospice  des  Incurables^&nd 
those  of  Petites  Maisons,  of  St.  Louis,  of  Charite,  and  many  others,  is  of  tha 


440  ON  CONSUMPTION.  BOOK  III. 

It  is  a  iistressing  reflection,  that  there  are  no  other  methods  of 
confining  the  number  of  applicants  for  relief  within  the  means 
available  to  the  community,  except  the  offer  of  hard  conditions,  or 
the  want  of  a  patron.  It  were  to  be  desired,  that  asylums  of  the 
more  comfortable  class,  instead  of  favouritism,  should  be  open  to 
unmerited  misfortune  only ;  and  that,  to  prevent  improper  nomina- 
tions, the  pretensions  of  the  candidate  should  be  ascertained  by  the 
inquest  of  a  jury.  The  rest  can  probably  be  protected  from  too 
great  an  influx  of  indigence,  by  no  other  means  consistent  with  hu- 
manity, except  the  observance  of  severe,  though  impartial,  discipline, 
sufficfent  to  invest  them  with  some  degree  of  terror. 

This  evil  does  not  apply  to  the  asylums  devoted  to  invalid  soldiers 
and  sailors.  The  qualification  is  so  plain  and  intelligible,  that  the 
doors  ought  to  be  shut  against  none  who  are  possessed  of  it ;  and 
the  comforts  of  the  institution  can  never  increase  the  number  of 
applicants.  Their  being  nursed  in  the  public  asylums  with  the  same 
domestic  care  and  comfort,  as  are  to  be  found  in  the  homes  of  per- 
sons in  the  same  class  of  life,  and  indulged  in  repose,  and  some  even 
of  the  whims  of  olcl  age,  will  undoubtedly  somewhat  enhance  the 
charge,  that  is  to  say,  so  far  as  it  might  prolong  lives,  that  other- 
wise might  fall  a  sacrifice  to  wretchedness ;  but  this  is  the  utmosl 
increase  of  charge ;  and  it  is  one,  that  neither  patriotism  nor  hu- 
manity will  grudge.* 

The  houses  of  industry,  that  are  multiplying  so  rapidly  in  America, 
Holland,  Germany,  and  France,  are  noble  and  excellent  institutions 
of  public  benevolence.  They  are  designed  to  provide  all  persons  of 
sound  health  with  work  according  to  their  respective  capacities ; 
some  of  them  are  open  to  any  workman  out  of  employ,  that  chooses 
to  apply ;  others  are  a  kind  of  houses  of  correction,  where  vagrants, 
beggars,  and  offenders,  are  kept  to  work  for  fixed  periods.  Con- 
victs have  sometimes  been  set  to  hard  labour  ih  their  respective 
vocations,  during  their  confinement ;  whereby  the  public  has  been 
wholly  or  partially  relieved  from  the  charge  of  keeping  up  gaols,  and 
a  method  contrived  for  reforming  the  morals  of  the  criminals,  and 
rendering  them  a  blessing,  instead  of  a  curse,  to  society. 

Indeed,  such  establishments  can  hardly  be  reckoned  among  the 
items  of  public  charge ;  for,  the  moment  their  production  equals 
their  consumption,  they  are  no  longer  ah  incumbrance  to  any  body- 
They  are  of  immense  benefit  in  a  dense  population,  where,  amidst 

former  kind ;  the  admissions  to  the  Hotel-Dieu,  Bicetre,  Saltpetriere,  and  En- 
fans-Trouves,  are  subject  to  a  limitation  of  the  latter  kind.  As  the  number  of 
applicants  duly  qualified  for  admission  in  the  establishment  first  mentioned  always 
exceeds  their  capacity,  the  choice  must  ultimately  be  decided  by  favour  or  interest. 
*  Yet  it  is  well  worth  consideration,  whether  it  be  not  more  to  the  advantage, 
both  of  the  state  and  of  its  pensioners,  to  maintain  them  at  their  own  homes 
upon  a  fixed  income,  or  to  board  them  out  with  individuals.  The  Abbe  de  St. 
Pierre,  whose  mind  was  ever  actively  at  work  for  the  public  good,  has  estimated 
Ihe  charge  of  maintaining  the  invalids  in  their  sumptuous  establishment  at  Paris, 
lo  be  three  times  as  much  as  that  of  their  maintenance  at  their  respective  homes 
Annales  Polit.  p.  209. 


CHAP.  VL  ON  CONSUMPTION.  441 

the  vast  variety  of  occupations,  some  must  unavoidably  >e  in  a  state 
of  temporary  inaction.  The  perpetual  shiftings  of  commerce,  the 
introduction  of  new  processes,  the  withdrawing  of  capital  from  a 
productive  concern,  accidental  fire,  or  other  calamity,  may  throw 
numbers  out  of  employment ;  and  the  most  deserving  individual 
may,  without  any  fault  of  his  own,  be  reduced  to  the  extreme  of 
want.  In  these  institutions,  he  is  sure  of  earning  at  least  a  subsist- 
ence, if  not  in  his  own  line,  in  one  of  a  similar  description. 

The  grand  obstacle  to  such  establishments  is,  the  great  outlay  of 
capital  they  require.  They  are  adventures  of  industry,  and  as  such 
must  be  provided  with  a  variety  of  tools,  implements,  and  machines, 
besides  raw  material  of  different  kinds  to  work  upon.  Before  they 
can  be  said  to  maintain  themselves,  they  must  earn  enough  to  pay 
the  interest  of  the  capital  embarked,  as  well  as  their  current  ex- 
penses. 

The  favour  shown  them  by  the  public  authority,  in  the  gratuitous 
supply  of  the  capital  and  buildings,  and  in  many  other  particulars, 
would  make  them  interfere  with  private  undertakings,  were  they  not 
subject,  on  the  other  hand,  to  some  peculiar  disadvantages.  They 
are  obliged  to  confine  their  operations  to  such  kinds  of  work,  as  sort 
with  the  feebleness  and  general  inferiority  in  skill  of  the  inmates, 
and  can  not  direct  them  to  such  as  may  be  most  in  demand.  More- 
over, it  is  in  most  of  them  a  matter  of  regulation  and  police,  to  lay 
by  always  the  third  or  fourth  part  of  the  labourer's  wages  or  earn- 
ings, as  a  capital  to  set  him  up,  on  his  quitting  the  establishment: 
this  is  an  excellent  precaution,  but  prevents  their  working  at  such 
cheap  rates,  as  to  drive  all  competition  out  of  the  market. 

Although  the  honour,  attached  to  the  direction  and  management 
of  institutions  of  public  benevolence,  will  generally  attract  the 
gratuitous  service  of  the  affluent  and  respectable  part  of  the  com- 
munity, yet,  when  the  duties  become  numerous  and  laborious,  they 
are  commonly  discharged  by  gratuitous  administrators  with  the 
most  unfeeling  negligence.  It  was  probably  by  no  means  wise,  to 
subject  all  the  hospitals  of  Paris  to  a  general  superintendence.  At 
London,  each  hospital  is  separately  administered ;  and  the  whole  are 
managed  with  more  economy  and  attention  in  consequence.  A 
laudable  emulation  is  thereby  excited  amongst  the  managers  of  rival 
establishments  ;  which  affords  an  additional  proof  of  the  practicabi- 
lity and  benefit  of  competition  in  the  business  of  oublic  administra- 
tion. 

Of  the  Charges  of  Public  Edifices  and  Works. 

I  shall  not  here  attempt  to  enumerate  the  great  variety  of  works 
requisite  for  the  use  of  the  public ;  but  merely  lay  down  some  gene- 
ral rules,  for  calculating  their  cost  to  the  nation.  It  is  often  impos 
sible  to  estimate  with  any  tolerable  accuracy  the  public  benefit  de- 
rived from  them.  How  is  one  to  calculate  the  utility,  that  is  to  say, 
the  pleasure  which  the  inhabitants  of  a  city  derive  from  a  puolic 

3F 


442  ON  CONSUMPTION.  BOOK  III. 

terrace  or  promenade?  It  is  a  positive  benefit  to  have,  wit  bin  an 
easy  distance  of  the  close  and  crowded  streets  of  a  populous  town, 
some  place  where  the  population  can  breathe  a  pure  and  wholesome 
atmosphere,  and  take  health  and  exercise,  under  the  shade  of  a 
grove,  or  with  a  verdant  prospect  before  the  eye ;  and  where  school- 
boys can  spend  their  hours  of  recreation;  yet  this  advantage  it 
would  be  impossible  to  set  a  precise  value  upon. 

The  amount  of  its  cost,  however,  may  be  ascertained  or  estin  aled. 
The  cost  of  every  public  work  or  construction  consists : — 

1.  Of  the  rent  of  the  surface  whereon  it  is  erected ;  which  rent 
amounts  to  what  a  tenant  would  give  to  the  proprietor. 

2.  Of  the  interest  of  the  capital  expended  in  the  erection. 

3.  Of  the  annual  charge  of  maintenance. 

Sometimes,  one  or  more  of  these  items  may  be  curtailed.  When 
the  soil,  whereon  a  public  work  is  erected,  will  fetch  nothing  from 
either  a  purchaser,  or  a  tenant,  the  public  will  be  charged  with 
nothing  in  the  nature  of  rent ;  for  no  rent  could  be  got  if  the  spot 
had  never  been  built  on.  A  bridge,  for  instance,  costs-  nothing  but 
the  interest  of  the  capital  expended  in  its  construction,  and  the 
annual  charge  of  keeping  it  in  repair.  If  it  be  suffered  to  fall  i  nto 
decay,  the  public  consumes,  annually,  the  agency  of  the  capital 
vested,  reckoned  in  the  shape  of  interest  on  the  sum  expended,  and, 
gradually,  the  capital  itself,  into  the  bargain;  for,  as  soon  as  the 
bridge  ceases  to  be  passable,  not  only  is  the  agency  or  rent  of  'he 
capital  lost,  but  the  capital  is  gone  likewise. 

Supposing  one  of  the  dikes  in  Holland  to  have  cost  in  the  outset, 
20,000  dollars ;  the  annual  charge  on  the  score  of  interest,  at  5  j  er 
cent.,  will  be  1000  dollars;  and,  if  it  cost  600  dollars  more  in  the 
keeping  it  up,  the  total  annual  charge  wrill  be  1600  dollars. 

The  same  mode  of  reckoning  may  be  applied  to  roads  and  cana  Is. 
If  a  road  be  broader  than  necessary,  there  is  annually  a  loss  of  the 
rent  of  all  the  superfluous  land  it  occupies,  and,  besides,  of  all  the 
additional  charge  of  repair.  Many  of  the  roads  out  of  Paris  are 
180  feet  wide,  including  the  unpaved  part  on  each  side;  whereas,  a 
breadth  of  60  feet  would  be  full  wide  for  all  useful  purposes,  ai  d 
would,  be.  quite  magnificent  enough,  even  for  the  approaches  to  a 
great  metropolis.  The  surplus  is  only  so  much  useless  splendoui  ; 
indeed,  I  hardly  know  how  to  call  it  so ;  for  the  narrow  pavemei  t 
in  the  centre  of  a  broad  road,  the  two  sides  of  which  are  impassable 
the  greater  part  of  the  year,  is  an  equal  imputation  upon  the  libei  - 
ality,  and  upon  the  good  sense  and  taste  of  the  nation.  It  gives  :i 
disagreeable  sensation,  to  see  so  much  loss  of  space,  more  particu- 
larly if  it  be  badly  kept.  It  appears  like  a  wish  to  have  magnificent 
roads,  witnout  having  the  means  of  keeping  them  uniform  and  in 
irood  condition  ;  like  the  palaces  of  the  Italian  nobles,  that  never  feel 
I  he  effects  of  the  broom. 

Be  it  as  it  may,  on  the  sides  of  the  road  I  am  speaking  of,  there 
.'s  a  space  of  120  feet,  that  might  be  restored  to  cultivation  ;  that  is  to 
.say,  48  acres  to  the  ordinary  league.  Add  together  the  rent  of  the 


CHAP.  VI.  ON  CONSUMPTION.  443 

surplus  land,  the  interest  of  the  sum  expended  in  the  first  cost  and 
preparation,  and  the  annual  charge  of  keeping  up  the  unnecessary 
space,  which  is  something,  badly  as  it  is  kept  up ;  you  will  then 
ascertain  the  sum  France  -pays  annually  for  the  very  questionable 
honour  of  having  roads  too  wide,  by  more  than  the  half,  leading  to 
streets  too  narrow,  by  three-fourths.* 

Roads  and  canals  are  costly  public  works,  even  in  countries  where 
they  are  under  judicious  and  economical  management.  Yet,  proba- 
bly, in  most  cases,  the  benefits  they  afford  to  the  community  far  ex- 
ceed the  charges.  Of  this  the  reader  may  be  convinced,  on  reference 
to  what  has  been  said  above  of  the  value  generated  by  the  mere 
commercial  operation  of  transfer  from  one  spot  to  another,!  and  of 
the  general  rule,  that  every  saving  in  the  charges  of  production  is  so 
much  gain  to  the  consumer.^  Were  we  to  calculate  what  would  be 
the  charge  of  carriage  upon  all  the  articles  and  commodities  that  now 
pass  along  any  road  in  the  course  of  a  year,  if  the  road  did  not  exist, 
and  compare  it  with  the  utmost  charge  under  present  circumstances, 
the  whole  difference  that  would  appear,  will  be  so  much  gain  to  the 
consumers  of  all  those  articles,  and  so  much  positive  and  clear  net 
profit  to  the  community.  § 

Canals  are  still  more  beneficial ;  for  in  them  the  saving  of  carriage 
is  still  more  considerable.! 

Public  works  of  no  utility,  such  as  palaces,  triumphal  arches, 
monumental  columns,  and  the  like,  are  items  of  national  luxury. 
They  are  equally  indefensible,  with  instances  of  private  prodigality. 
The  unsatisfactory  gratification  afforded  by  them  to  the  vanity  of  the 
prince  Or  the  people,  by  no  means  balances  the  cost,  and  often  the 
misery  they  have  occasioned. 

*  With  all  this  waste  of  space  in  the  great  roads  of  France,  there  are  in  none 
of  them  either  paved  or  gravelled  foot-ways,  passable  at  all  seasons,  or  stone 
seats,  for  the  travellers  to  rest  upon,  or  places  of  temporary  shelter  from  the 
weather,  or  cisterns  to  quench  the  thirst;  all  which  might  be  added  with  a  very 
trifling  expense. 

-j-  Book  I.  chap.  9.  t  Book  H-  chaP-  3- 

§  To  say,  that  if  the  road  were  not  in  existence,  the  charge  of  transport  could 
never  be  so  enormous  as  here  suggested,  because  the  transport  would  never  take 
place  at  all,  and  people  would  contrive  to  do  without  the  objects  of  transport, 
would  be  a  strange  way  of  eluding  the  argument.  Self-denial  of  this  kind, 
enforced  by  the  want  of  means  to  purchase,  is  an  instance  of  poverty,  not  of 
wealth.  The  poverty  of  the  consumer  is  extreme,  in  respect  to  every  object  he  is 
thus  made  too  poor  to  purchase  ;  and  he  becomes  richer  in  respect  to  it,  in  pro- 
portion as  its  price  or  value  declines. 

II  In  lieu  of  canals,  iron  rail-roads  from  one  town  to  another  will  probably  be 
one  day  constructed.  The  saving  in  the  cost  of  transport  would  probably 
exceed  the  interest  of  the  very  heavy  expense  in  the  outset.  Besides  the  addi- 
tional facility  of  movement,  roads  of  this  kind  would  remedy  the  violent  jolting 
of  passengers  and  goods.  Undertakings  of  such  magnitude  can  only  be  ^rose- 
cuted  in  countries  where  capital  is  very  abundant,  and  where  the  government 
inspires  the  adventurers  with  the  firm  assurance  of  reaping  themselves  the  profit 
of  the  adventure. 


444  ON  CONSUMPTION.  BOOK  III 

CHAPTER  VH. 

OF  THE  ACTUAL  CONTRIBUTORS  TO  PUBLIC  CONSUMPTION. 

A  PORTION  of  the  objects  of  public  consumption  have,  in  some  very 
rare  instances,  been  provided  by  a  private  individual.  We  see  occa- 
sional acts  of  private  munificence,  in  the  erection  of  a  hospital,  the 
laying  out  of  a  road,  or  of  public  gardens  upon  the  land,  and  at  the 
cost,  of  an  individual.  In  ancient  times,  examples  of  this  kind  were 
more  frequent,  though  much  less  meritorious.  The  private  opulence 
of  the  ancients  was  commonly  the  fruit  of  domestic,  or  provin- 
cial, plunder  and  peculation,  or  perhaps  the  spoil  of  a  hostile  nation, 
purchased  with  the  blood  of  fellow-citizens.  Among  the  moderns, 
though  such  excesses  do  sometimes  occur,  individual  wealth  is,  in  the 
great  majority  of  cases,  the  fruit  of  personal  industry  and  economy. 
In  England,  where  there  are  so  many  institutions  founded  and  sup- 
ported by  private  funds,  most  of  the  fortunes  of  the  founders  and 
supporters  have  been  acquired  in  industrious  occupations.  It  re- 
quires a  greater  exertion  of  generosity  to  sacrifice  wealth,  acquired 
by  a  long  course  of  toil  and  self-denial,  than  to  give  away  what  has 
been  obtained  by  a  stroke  of  good  fortune,  or  even  by  an  act  of 
lucky  temerity. 

Among  the  Romans,  a  further  portion  of  the  public  consumption 
was  supplied  directly  by  the  vanquished  nations  who  were  subjected 
to  a  tribute  which  the  victors  consumed. 

In  most  modern  states,  there  is  some  territorial  property  vested, 
either  in  the  nation  at  large,  or  in  the  subordinate  communities,  cities, 
towns,  and  villages,  which  is  leased  out,  or  occupied  directly  by  the 
public.  In  France,  most  of  the  public  lands  of  tillage  and  pasturage, 
with  their  appurtenances,  are  let  out  on  lease  ;  the  government  re- 
serving only  the  national  forests  under  the  direct  administration  of  its 
agents.  The  produce  of  the  whole  forms  a  considerable  item  in  the 
catalogue  of  public  resources. 

But  these  resources  consist,  for  the  most  part,  of  the  produce  of 
taxes  levied  upon  the  subjects  or  citizens.  These  taxes  are  some- 
times national,  that  is,  levied  upon  the  whole  nation,  and  paid  into 
the  general  treasury  of  the  state,  whence  the  public  national  expendi- 
ture is  defrayed ;  and  sometimes  local,  or  provincial,  that  is,  levied 
upon  the  inhabitants  of  a  certain  canton  or  province  only,  and  paid 
into  the  local  treasury,  whence  are  defrayed  the  local  expenses. 

It  is  a  principle  of  equity,  that  consumption  should  be  charged  to 
those  who  derive  gratification  from  it ;  consequently,  those  countries 
must  be  pronounced  to  be  the  best  governed,  in  respect  of  taxation, 
where  each  class  of  inhabitants  contributes  in  taxation  proportionately 
to  the  benefit  derived  by  it  from  the  expenditure. 

Every  individual  and  class  in  the  community  is  benefitted  by  the 
central  administration,  or,  in  other  words,  the  general  government . 


CHAP,  m  ON  CONSUMPTION.  445 

so  likewise  of  the  security  afforded  by  the  national  military  estab 
lishment ;  for  the  provinces  can  hardly  be  secure  from  external 
attack,  if  the  enemy  have  possession  of  the  metropolis,  and  can 
thence  overawe  and  control  them;  imposing  laws  upon  districts 
where  his  force  has  not  penetrated,  and  disposing  of  the  lives  and 
property  even  of  such  as  have  not  seen  the  face  of  an  enemy.  For 
the  same  reason  the  charge  of  fortresses,  arsenals,  and  diplomatic 
agents  is  properly  thrown  upon  the  whole  community. 

It  would  seem,  that  the  administration  of  justice  should  be  classed 
among  the  general  charges,  although  the  security  and  advantage  it 
affords  have  more  of  a  local  character.  When  the  magistracy  of 
Bordeaux  arrests  and  tries  an  offender,  the  public  internal  security  of 
France  is  unquestionably  promoted.  The  charge  of  gaols  and  court- 
houses necessarily  follows  that  of  the  magistracy.  Smith  has  ex- 
pressed an  opinion,  that  civil  justice  should  be  defrayed  by  the  liti- 
gating parties ;  -which  would  be  more  practicable  than  at  present, 
were  the  judges  in  the  appointment  of  the  parties  in  each  particular 
case,  and  no  otherwise  in  the  nomination  of  the  public  authority, 
than  inasmuch  as  the  choice  might  be  limited  to  specified  persons  of 
approved  knowledge  and  integrity.  They  would  then  be  arbitra- 
tors, and  a  sort  of  equitable  jurors,  and  might  be  paid  proportion- 
ately to  the  matter  in  dispute  without  regard  to  the  length  of  the 
suit;  and  would  thus  have  an  obvious  interest  in  simplifying  the 
process,  and  sparing  their  own  time  and  trouble,  as  well  as  in 
attracting  business  by  the  general  equity  of  their  decisions,  (a) 

But  local  administration  and  local  institutions  of  utility,  pleasure, 
instruction,  or  beneficence,  appear  to  yield  a  benefit  exclusively  to 
the  place  or  district  where  they  are  situated.  Wherefore,  it  should 
seem,  that  their  expenses  ought  to  fall,  as  in  most  countries  they  do, 
upon  the  local  population.  Not  but  that  the  nation  at  large  derives 
some  benefit  from  good  provincial  administration, -or  institutions.  A 
stranger  has  access  to  the  public  places,  libraries,  schools,  walks, 
and  hospitals  of  the  district ;  but  the  principal  benefit  unquestionably 
results  to  the  immediate  neighbourhood. 

It  is  good  economy  to  leave  the  administration  of  the  local  re- 
ceipts and  disbursements  to  the  local  authorities;  particularly  where 

(a)  Our  author  seems  in  this  passage  to  have  become  a  convert  to  the  opinion 
of  Smith,  in  respect  to  the  civil  tribunals  of  a  nation,  from  which  he  had  ex- 
pressed his  dissent,  in  former  editions.  Though  arbitration  may  be  a  very  good 
mode  of  settling  civil  suits,  where  the  parties  are  both  anxious  to  come  to  a  set- 
tlement, and  indeed  is  frequently  resorted  to,  and  should  always  be  encouraged; 
yet  it  is  manifest,  that  there  must  be  a  compulsory  tribunal  for  the  obstinate,  or 
refractory.  And,  since  security  of  person  and  property  is  the  main  object  of 
social  institutions,  it  is  but  just,  that  invasion  in  a  particular  instance  should  be 
repelled  and  deterred  at  the  public  charge.  In  strict  justice,  the  invader  shou'd 
be  held  to  make  good  the  whole  damage ;  and  so  he  is  or  ought  to  be,  in  the 
shape  of  costs,  fine,  damages,  or  otherwise.  But  it  is  not  consistent  with  equity 
that  the  sufferer  should  be  deterred  from  pursuing  his  claim,  by  superadding  a 
proportion  of  the  outlay  upon  the  judicial  establishments  to  the  charge  of  wit- 
nesses and  agents,  which  he  must  necessarily  advance,  and  to  the  risk  of  In- 

in  the  delinquent,  even  in  the  event  of  ultimate  success.    T. 
38 


446  ON  CONSUMPTION.  BOOK  III. 

they  are  appointed  by  those,  whose  funds  they  administer.  There 
is  much  less  waste,  when  the  money  is  spent  under  the  eye  of  those 
who  contribute  it,  and  who  are  to  reap  the  benefit ;  besides,  the  ex- 
pense is  better  proportioned  to  the  advantage  expected.  When  one 
passes  through,  a  city  or  town  badly  paved  and  ill-conditioned,  or 
sees  a  canal  or  harbour  in  a  state  of  dilapidation,  one  may  conclude, 
in  nine  cases  out  of  ten,  that  the  authorities,  who  are  to  administer 
the  funds  appropriated  to  those  objects,  do  not  reside  on  the  spot. 

In  this  particular,  small  states  have  an  advantage  over  more  exten- 
sive ones.  They  have  more  enjoyment  from  a  less  expenditure  upon 
objects  of  public  utility  or  amusement;  because  they  are  at  hand  to 
see  that  the  funds,  destined  to  the  object,  are  faithfully  applied. 


CHAPTER  VIII. 

OP  TAXATION. 

SECTION  L 
Of  the  Effect  of  all  kinds  of  Taxation  in  general. 

TAXATION  is  the  transfer  of  a  portion  of  the  national  products 
from  the  hands  of  individuals  to  those  of  the  government,  for  the 
purpose  of  meeting  the  public  consumption  or  expenditure.  What- 
ever be  the  denomination  it  bears,  whether  tax,  contribution,  duty, 
excise,  custom,  aid,  subsidy,*  grant,  or  free  gift,  it  is  virtually  a  bur- 
then imposed  upon  -individuals,  either  in  a  separate  or  corporate 
character,  by  the  -ruling  power  for  the  time  being,  for  the  purpose 
of  supplying  the  consumption  it  may  think  proper  to  make  at  their 
expense;  in  short,  an  impost,  in  the  literal  sense. 

It  would  be  foreign  to  the  plan  of  this  work,  to  inquire  in  whom 
the  right  of  taxation  is  or  ought  to  be  vested.  In  the  science  of 
political  economy,  taxation  must  be  considered  as  matter  of  fact,  and 
not  of  right;  and  nothing  further  is  to  be  regarded,  than  its  nature, 

*  What  avails  it,  for  instance,  that  taxation  is  imposed  by  consent  of  the  peo- 
ple or  their  representatives,  if  there  exists  in  the  state  a  power,  that  by  its  acts 
can  leave  the  people  no  alternative  but  consent!  De  Lolme,  in  his  Essay  on 
the  English  Constitution,  says  that  the  right  of  the  Crown  to  make  war  is  nu- 
gatory, while  the  people  have  the  right  of  refusing  the  supplies  for  carrying  it 
on.  May  it  not  be  said,  with  much  more  truth,  that  the  right  of  the  people  to 
deny  the  supplies  is  nugatory,  when  the  crown  has  involved  them  in  a  predica- 
ment that  makes  consent  a  matter  of  necessity  1  The  liberiies  of  Great  Britain 
have  no  real  security,  except  in  the  freedom  of  the  press ,  which  rests  itself, 
rather  upon  the  habits  and  opinions  of  the  nation,  than  upon  legal  enactments 
or  judicial  decisions.  A  nation  is  free,  when  it  is  bent  on  freedom ;  and  the  most 
formidable  obstacle  to  the  establishment  of  civil  liberty  is  the  absence  of  the 
desire  for  it. 


CHAP.  VII L  ON  CONSUMPTION.  447 

the  source  whence  it  derives  the  values  it  absorbs,  and  its  effect  upon 
national  and  individual  interests.  The  province  of  this  science  ex- 
tends no  further. 

The  object  of  taxation  is,  not  the  actual  commodity,  but  the 
value  of  the  commodity,  given  by  the  tax-payer  to  the  tax-gatherer. 
Its  being  paid  in  silver,  in  goods,  or  in  personal  service,  is  a  mere 
accidental  circumstance,  which  may  be  more  or  less  advantageous  to 
the  subject  or  to  the  sovereign.  The  essential  point  is,  the  value  of 
the  silver,  the  goods,  or  the  service.  The  moment  that  value  is  part- 
ed with  by  the  tax-payer,  it  is  positively  lost  to  him ;  the  momen 
it  is  consumed  by  the  government  or  its  agents,  it  is  lost  to  all  the 
world,  and  never  reverts  to,  or  re-exists  in  society,  This,  I  appre- 
hend, has  already  been  demonstrated,  when  the  general  effect  of  pub- 
lic consumption  was  under  consideration.  It  was  there  shown,  that 
however  the  money  levied  by  taxation  may  be  refunded  to  the  na- 
tion, its  value  is  never  refunded ;  because  it  is  never  returned  gra- 
tuitously, or  refunded  by  the  public  functionaries,  without  receiving 
an  equivalent  in  the  way  of  barter  or  exchange. 

The  same  causes,  that  we  have  found  to  make  unproductive  con- 
sumption nowise  favourable  to  reproduction,  prevent  taxation  from 
at  all  promoting  it.  Taxation  deprives  the  producer  of  a  product, 
which  he  would  otherwise  have  the  option  of  deriving  a  personal 
gratification  from,  if  consumed  unproductively,  or  of  turning  to 
profit,  if  he  preferred  to  devote  it  to  an  useful  employment.  One  pro- 
duct is  a  means  of  raising  another;  and,  therefore,  the  subtraction  of 
a  product  must  needs  diminish,  instead  of  augmenting,  productive 
power. 

It  may  be  urged,  that  the  pressure  of  taxation  impels  the  produc- 
tive classes  to  redouble  their  exertions,  and  thus  tends  to  enlarge  the 
national  production.  I  answer,  that,  in  the  first  place,  mere  exertion 
can  not  alone  produce,  there  must  be  capital  for  it  to  work  upon,  and 
capital  is  but  an  accumulation  of  the  very  products,  that  taxation 
takes  from  the  subject :  that,  in  the  second  place,  it  is  evident,  that 
the  values,  which  industry  creates  expressly  'to  satisfy  the  demands 
of  taxation,  are  no  increase  of  wealth;  for  they  are  seized  on  and  de- 
voured by  taxation.  It  is  a  glaring  absurdity  to  pretend,  that  taxa- 
tion contributes  to  national  wealth,  by  engrossing  part  of  the  national 
produce,  and  enriches  the  nation  by  consuming  part  of  its  wealth. 
Indeed,  it  would  be  trifling  with  my  reader's  time,  to  notice  such  a 
fallacy,  did  not  most  governments  act  upon  this  principle,  and  had 
not  well-intentioned  and  scientific  writers  endeavoured  to  support 
and  establish  it* 

*  By  the  same  reasoning  it  has  been  attempted  to  prove,  that  luxury  and  bar- 
ren consumption  oporate  as  a  stimulus  to  production.  Yet  they  are  less  mis- 
chievous than  taxation;  inasmuch  as  they  redound  to  the  personal  gratification 
of  the  party  himself:  whereas,  to  use  the  expedient  of  taxation  as  a  stimulative 
to  increased  production,  is  to  redouble  the  exertions  of  the  community,  for  lh<; 
sole  purpose  of  multiplying  its  privations,  rather  than  its  enjoyments.  For,  il 
increased  taxation  bo  applied  to  the  support  of  a  complex,  overgrown,  and  osten 
tatious  internal  administration,  or  of  a  superfluous  and  disproportionate  military 
establishment,  that  joay  act  as  a  drain  of  individual  wealth,  and  of  the  flow«r 


448  ON  CONSUMPTION.  BOOK  III 

If,  from  the  circumstance,  that  the  nations  most  grievously  taxed 
ire  those  most  abounding  in  wealth,  as  Great  Britain,  for  example, 
we  are  desired  to  infer,  that  their  superior  wealth  arises  from  their 
heavier  taxation,  it  would  be  a  manifest  inversion  of  cause  and  effect. 
A  man  is  not  rich,  because  he  pays  largely ;  but  he  is  able  to  pajr 
largely,  because  he  is  rich.  It  would  be  not  a  little  ridiculous,  if  a 
man  should  think  to  enrich  himself  by  spending  largely,  because  he 
sees  a  rich  neighbour  doing  so.  It  must  be  clear,  that  the  rich  man 
spends,  because  he  is  rich ;  but  never  can  enrich  himself  by  the  act 
of  spending 

Cause  and  effect  are  easily  distinguished,  when  they  occur  in  suc- 
cession 5  hut  are  often  confounded,  when  the  operation  is  continuous 
and  simultaneous. 

Hence,  it  is  manifest,  that,  although  taxation  maybe,  and  often  is., 
productive  of  good,  when  the  sums  it  absorbs  are  properly  applied", 
yet,  the  act  of  levying  is  always  attended  with  mischief  in  the  outset. 
And  this  mischief  good  princes  and  governments  have  always  en- 
deavoured to  render  as  inconsiderable  to  their  subjects  as  possible,  by 
the  practice  of  economy,  and  by  levying,  not  to  the  full  extent  of 
the  people's  ability,  but  to  such  extent  only  as  is  absolutely  una- 
\oidable.  That  rigid  economy  is  the  rarest  of  princely  virtues,  is 
owing  to  the  circumstance  of  the  throne  being  constantly  beset  with 
individuals,  who  are  interested  in  the  absence  of  it;  and  who  are  al- 
ways endeavouring,  by  the  most  specious  reasoning,  to  impress  the 
conviction,  that  magnificence  is  conducive  to  public  prosperity,  and 
that  profuse  public  expenditune  is  beneficial  to  the  state.  It  is  the 
object  of  this  third  book  to  expose  the  absurdities  of  such  repre- 
sentations. 

Others  there  are,  who  are  not  impudent  enough  to  pretend,  thai 
public  profusion  is  a  public  benefit ;  yet  undertake  to  show  by  arith- 
metical deduction,  that  the  people  are  scarcely  burthened  at  all,  and 
are  equal  to  a  much  higher  scale  of  taxation.  As  Sully  tells  us  in 
his  Memoirs,  "  The  ear  of  the  prince  is  assailed  by  a  set  of  flattering 
advisers,  who  think  to  make  their  court  to  him  by  perpetually  sug- 
gesting new  ways  of  raising  money;  discharged  functionaries,  for 
the  most  part,  whose  experience  of  the  sweets  of  office  has  left  no 
other  impression,  than  the  tincture  of  the  baneful  art  of  fiscal  extor- 
tion; and  who  seek  to  recommend  themselves  to  power  and  favour, 
by  commending  it  to  the  lips  of  royalty."* 

Others  suggest  financial  projects,  and  ways  and  means  for  filling 
the  coffers  of  the  prince,  as  they  assert,  without  fleecing  the  subject. 
But  no  plan  of  finance  can  give  to  the  government,  without  taking 
either  from  the  people,  or  from  the  government  itself  in  some  other 
way;  unless  it  be  a  downright  adventure  of  industry.  Something 
'*nn  not  be  produced  out  of  nothing  by  a  mere  touch  of  the  wand. 
However  an  operation  may  be  cloaked  in  mystery,  however  often 

Dt"  the  nutional  youth,  and  an  asrtrressor  upon  the  peace  and  happiness  of  domes- 
lie  life,  will  not  this  be  paying  as  dearly  for  a  grievous  public  nuisance,  as  if  it 
were  r.  benefit  of  the  first  magnitude  1 
*  Memaires,  liv.  xx. 


ON  CONSUMPTION.  449 

we  may  twist  and  turn  and  transform  values,  there  are  but  two  ways 
of  obtaining  them,  namely,  creating  oneself,  or  taking  from  others. 
The  best  scheme  of  finance  is,  to  spend  as  little  as  possible;  and  the 
best  tax  is  always  the  lightest. 

Admitting  these  premises,  that  taxation  is  the  taking  Irom  in- 
dividuals a  part  of  their  property*  for  public  purposes;  that  the  value 
levied  by  taxation  never  reverts  to  the  members  of  the  community, 
after  it  has  once  been  taken  from  them ;  and  that  taxation  is  not  itself 
a  means  of  reproduction ;  it  is  impossible  to  deny  the  conclusion, 
that  the  best  taxes,  or,  rather  those  that  are  least  bad,  are 

1    Such  as  are  the  most  moderate  in  their  ratio. 

2.  Such  as  are  least  attended  with  those  vexatious  circumstances, 
that  harass  the  tax-payer  without  bringing  any  thing  into  the  public 

Exchequer. 

3.  Such  as  press  impartially  on  all  classes. 

4.  Such  as  are  least  injurious  to  reproduction. 

5.  Such  as  are  rather  favourable  than  otherwise  to  the  national 
morality;  that  is  to  say,  to  the  prevalence  of  habits,  useful  and  bene- 
ficial to  society. 

These  positions  are  almost  self-evident;  yet  I  shall  proceed  to 
illustrate  them  successively,  with  some  few  observations. 

1.  Of  such  as  are  most  moderate  in  their  ratio. 

Since  taxation  does,  in  point  of  fact,  deprive  the  tax-payer  of  a 
product,  which  is  to  him,  either  a  means  of  personal  gratification,  or 
a  means  of  reproduction,  the  lighter  the  tax  is,  the  less  must  be  the 
privation. 

Taxation,  pushed  to  the  extreme,  has  the  lamentable  effect  of 
impoverishing  the  individual,  without  enriching  the  state.  We  may 
readily  conceive  how  this  can  happen,  if  we  recall  to  our  attention 
the  former  position ;  viz.  that  each  tax-payer's  consumption,  whether 
productive  or  not,  is  always  limited  to  the  amount  of  his  revenue. 
No  part  of  his  revenue,  therefore,  can  be  taken  from  him  without 
necessarily  curtailing  his  consumption  in  the  same  ratio.  This  must 
needs  reduce  the  demand  for  all  those  objects  he  can  no  longer  con- 
sume, and  particularly  those  affected  by  taxation.  The  diminution 
of  demand  must  be  followed  by  diminution  of  the  supply  of  pro- 
duction; and,  consequently,  of  the  articles  liable  to  taxation.  Thus, 
the  tax-payer  is  abridged  of  his  enjoyments,  the  producer  of  his 
profits,  and  the  public  exchequer  of  its  receipts/)-  t 

*Tt  is  hardly  necessary  to  controvert  an  opinion,  entertained  by  sovereigns  in 
times  past,  respecting  the  property  of  their  subjects.  We  find  Louis  XIV. 
writing  in  these  terms,  professedly  for  the  instruction  of  his  son  in  matters  of 
government :  "  Kings  are  absolute  lords  naturally  possessing  the  entire  and  un- 
controlled disposal  of  all  property,  whether  belonging  to  the  church  or  to  the. 
laity,  to  be  exercised  at  all  times  with  due  regard  to  economy,  and  to  the  general 
interests  of  the  state."  (Euvres  de  Louis  XIV.,  Memoires  Hist.  A.  D.  1666. 

fin  France,  before  1789,  the  average  annual  consumption  of  salt  was  esti. 

mated  at  9  Ibs.  per  head  in  the  districts  subject  to  the  gabdle,  and  at  18  Iba. 

per  head  in  those  exempt  from  that  impost.    De  Monthieu,  Influence  des  divet » 

Imnots    p  141      Thus,   taxation  in   this  form  obstructed  the  production  of  \ 

38*  3G 


450  ON  CONSUMPTION.  BOOK  III. 

This  is  the  reason  why  a  tax  is  not  productive  to  the  public 
exchequer,  in  proportion  to  its  ratio ;  and  why  it  has  become  a  sort 
of  apophthegm,  that  two  and  two  do  not  make  four  in  the  arithmetic 
of  finance.  Excessive  taxation  is  a  kind  of  suicide,  whether  laid 
upon  objects  of  necessity,  or  upon  those  of  luxury ;  but  there  is  this 
distinction,  that,  in  the  latter  case,  it  extinguishes  only  a  portion  of 
the  products  on  which  it  falls,  together  with  the  gratification  they 
are  calculated  to  afford ;  while,  in  the  former,  it  extinguishes  both 
production  and  consumption,  and  the  tax-payer  into  the  bargain. 

Were  it  not  almost  self-evident,  this  principle  might  be  illustrated, 
by  abundant  examples  of  the  profit  the  state  derives  from  a  moderate 
scale  of  taxation,  where  it  is  sufficiently  awake  to  its  real  interests. 

When  Turgot,  in  1775,  reduced  to  \  the  market-dues  and  duties 
of  entry  upon  fresh  sea-fish  sold  in  Paris,  their  product  was  nowise 
diminished.  The  consumption  of  that  article  must,  therefore,  have 
doubled,  the  fishermen  and  dealers  must  have  doubled  their  conceins 
and  their  profits;  and,  since  population  always  increases  with 
increasing  production,  the  number  of  consumers  must  have  been 
enlarged;  and  that  of  producers  must  have  been  enlarged  likewise; 
for  an  increase  of  profits,  that  is  to  say  of  individual  revenue,  mul- 
tiplies savings,  and  thus  generates  the  multiplication  of  capital  and 
of  families ;  and  that  very  increase  of  production  will,  beyond  all 
doubt,  augment  the  product  of  taxation  in  other  branches;  to  say 
nothing  of  the  popularity  accruing  to  the  government  from  the  alle- 
viation of  the  national  burthens. 

The  government  agents,  who  farm  or  administer  the  collection  of 
the  taxes,  very  often  abuse  their  interest  and  authority,  to  construe 

of  this  article  in  the  districts  subjected  to  it,  and  reduced  to  \  the  enjoyment  it 
was  capable  of  affording ;  to  say  nothing  of  the  other  mischiefs-resulting  from 
it;  the  injury  to  tillage,  to  the  feeding  of  cattle,  and  to  the  preparation  of  salted 
goods;  the  popular  animosity  against  the  collectors  of  tax,  the  consequent  in- 
crease of  crime  and  conviction,  and  the  consignment  to  the  galleys  of  numerous 
individuals,  whose  industry  and  courage  might  have  been  made  available  to  the 
increase  of  national  opulence. 

In  1804,  the  English  government  raised  the  duties  on  sugar  20  per  cent.  It 
might  have  been  expected,  that  their  average  product  to  the  public  exchequer 
would  have  been  advanced  in  the  same  ratio;  i.  e.  from  2,778,OOOZ.  the  former 
amount,  to  3,330,OOOJ. :  instead  of  which  the  increased  duties  produced  but 
2,537,OOOZ. ;  exhibiting  an  absolute  deficit.  Speech  of  Henry  Brougham,  Esq., 
M,  P.,  March  13,  1817. 

The  people  of  Great  Britain  might  consume  French  wines  at  a  very  little 
advance  upon  the  prices  of  France,  and  have  the  enjoyment  of  an  unadulterated, 
wholesome,  and  exhilarating  beverage,  costing  perhaps  a  shilling  a  bottle.  But 
the  exorbitant  duty  upon  this  article  has  reduced  its  import  and  the  product  of 
the  duty  to  a  very  trifle;  and  thus,  the  sole  benefit  resulting  from  the  tax  to  the 
British  nation  is,  the  total  privation  of  a  cheap  and  wholesome  object  of  con- 
sumption. 

The  two  last  examples  are  a  sufficient  answer  to  the  objection  taken  by 
Ricardo  to  this  passage  of  my  text ;  on  the  ground  that  taxation  is  not  injurious 
to  production  ij  ihe  aggregate,  inasmuch  as  the  consumption  of  the  state  itself 
replaces  that  of  individuals,  which  is  annihilated  by  the  tax.  A  tax,  that  robs 
'.he  ind:vidual,  without  benefit  to  the  exchequer,  substitutes  no  public  consump- 
tion w'-atever.  <n  place  of  the  private  consumption  it  extinguishes. 


CHAP.  VIIL  ON  CONSUMPTION.  451 

all  doubtful  points  of  fiscal  law  in  their  own  favour,  and  sometimes 
to  create  obscurity  for  the  purpose  of  profiting  by  it.  The  effect  is 
precisely  the  same,  as  if  the  scale  of  taxation  were  raised  pro  tanto.* 
Turgot  adopted  a  contrary  course,  and  made  it  a  rule  to  lean 
always  to  the  side  of  the  tax-payer.  The  public  contractors  made 
a  great  outcry  at  this  innovation,  declaring  that  it  was  impossible 
for  them  to  fulfil  their  engagements,  and  offering  to  collect  on  the 
government  account  and  risk.  The  event,  however,  falsified  their 
predictions  by  an  actual  increase  of  the  receipts.  The  greater  lenity 
in  the  collection  proved  so  advantageous  to  production,  and  the  con- 
sumption, consequent  upon  it,  that  the  profits,  which  had  before  not 
exceeded  10,550,000 /m,  rose  to  60,000,000  liv. ;  an  advance  which 
could  hardly  be  credited,  if  it  were  not  attested  by  unquestionable 
evidence-! 

We  are  told  by  Humboldt,J  to  whom  we  are  indebted  for  a  variety 
of  valuable  information,  that  in  thirteen  years  from  1778,  during 
which  time  Spain  adopted  a  somewhat  more  liberal  system  of 
government  in  regard  to  her  American  dependencies,  the  increase 
of  the  revenue  in  Mexico  alone  amounted  to  no  less  a  sum  than  100 
millions  of  dollars;  and  that  she  drew  from  that  countiy,  during  the 
same  period,  an  addition  in  the  single  article  of  silver,  to  the  amount 
of  14,500,000  dollars.  We  may  naturally  suppose,  that,  in  those 
years  of  prosperity,  there  was  a  corresponding,  and  rather  greater 
increase  of  individual  profits;  for  that  is  the  source,  whence  all 
public  revenue  is  derived. 

A  similar  course  of  conduct  has  invariably  been  followed  by  a 
similar  effect  ;§  and  it  is  a  great  satisfaction  to  a  writer  of  liberal 

*  Of  this,  a  striking  instance  is  given  in  a  work  entitled,  Diverses  Idees  sur  la 
Legislation  et  F Administration,  par  M.  C.  St.  Paul.  One  of  the  principal 
bankers  of  Paris  having  died  in  1817,  the  duty  on  legacies  and  inheritance  was 
levied  upon  the  aggregate  of  his  credit-account,  and  not  upon  the  balance,  after 
deducting  the  debits;  and  this  by  virtue  of  a  proviso  in  the  revenue  laws,  which 
charges  the  duty  upon  the  gross  estate  of  a  defunct,  and  not  upon  the  residue 
after  the  discharge  of  the  outstanding  claims.  The  danger  of  fraud  upon  the 
revenue  in  stating  the  account,  is  not  sufficient  to  justify  the  exaction  of  more 
than  is  fairly  due. 

The  same  department  is  in  the  habit  of  giving  no  notice  to  the  executors  or 
other  parties,  of  the  payments  falling  due,  until  after  the  legal  time  has  expired, 
in  the  hope  of  incurring  the  penalty  of  default.  The  revolution  had  abolished 
this  official  and  fiscal  severity ;  but  it  was  revived  by  the  imperial  government, 
and  has  been  acted  upon  ever  since.  A  clerk  or  officer  has  no  chance  of  promo- 
tion, unless  he  shows  a  disposition  on  all  occasions  to  postpone  the  interests  of 
the  public  to  those  of  the  exchequer. 

f  (Euvrcs  de  Turgot,  torn.  i.  p.  170.  The  accounts  of  the  farmers-general 
were  minutely  stated,  and  rigidly  investigated,  because  the  crown  participated 
in  their  profits. 

I  Essai  Pol.  sur  la  Nouvelle  Espagne,  liv.  v.  c.  12. 

5  This  position  is  further  confirmed  by  an  instance  mentioned  in  a  letter,  ad- 
dressed in  1785,  by  the  then  Marquis  of  Lansdowne  to  the  Abbe  Morellet,  slating, 
'that  in  respect  to  the  article  of  tea,  the  good  effect  of  the  reduction  of  duty  hail 
surpassed  all  expectation.  The  amount  of  sale  had  advanced  from  5,000,000 
Ibs.  to  12.000,000  Ibs.,  in  spite  of  many  unfavourable  circumstances. 


452  ON  CONSUMPTION.  BOOK  III 

principles  to  be  able  to  prove  by  experience,  that  moderation  is  the 
best  policy.* 

Upon  the  same  principles,  it  will  be  easy  to  demonstrate  in  the 
next  place,  that  the  taxes  least  mischievous  are : 

2.  Such  as  are  least  attended  with  those  vexatious  circumstances, 
that  harass  the  tax-payer,  without  bringing  any  thing  into  the  public 
exchequer. 

It  has  been  held  by  many,  that  the  costs  of  collection  are  no  very 
great  evil,  inasmuch  as  they  are  refunded  to  the  community  in  some 
other  shape.  On  this  head,  I  must  refer  my  readers  to  what  has 
been  already  observed.f  These  costs  are  no  more  refunded,  than 
the  net  proceeds  of  the  taxes  themselves;  because  both  the  one  and 
the  other  consists  in  reality,  not  of  the  money,  wherein  the  taxes 
are  paid,  but  of  the  value,  wherewith  the  tax-payer  produces  that 
money,  and  the  value  which  the  government  again  procures  with  it; 
which  latter  is  destroyed  and  consumed  outright. 

The  necessities  of  princes  have  operated  far  more  effectually  than 
their  regard  to  the  public  good,  to  introduce  the  practice  of  better 
order  and  economy  in  the  financial  departments  of  most  European 
states  during  the  two  last  centuries,  than  in  former  times.  The 
people  are  generally  made  to  bear  as  much  as  they  can  well  stand 
under ;  so  that  every  saving  in  the  charge  of  collection  has  gone  to 
swell  the  receipts  of  the  exchequer. 

Sully  tells  us  in  his  Memoirs,J  that,  for  about  6  millions  of  dollars 
brought  into  the  royal  treasury,  in  1598,  by  means  of  taxation,  indi- 
viduals were  out  of  pocket  about  30  millions  of  dollars,  and  assures 
us,  that  he  had  with  great  pains  ascertained  the  fact,  however  incre- 
dible it  might  appear.  Under  the  administration  of  Necker,  upon  a 

which,  smuggling  had  been  so  much  crippled,  that  the  public  revenue  had  been 
increased  to  a  degree  that  astonished  every  body.' 

*  This  doctrine  has  been  combated  by  Ricardo,  in  his  Principles  of  Political 
Economy  and  Taxation.    That  writer  maintains,  that  since  the  amount  and  the 
product  of  industry  are  always  proportionate  to  the  quantum  of  the  capital  en- 
gaged in  it,  the  extinction  of  one  branch  by  taxation  must  needs  be  compensated 
by  the  product  of  some  other,  towards  which  the  industry  and  capital,  thrown 
out  of  employ,  will  naturally  be  diverted.     I  answer,  that  whenever  taxation 
diverts  capital  from  one  mode  of  employment  to  another,,  it  annihilates  the  profits 
of  all  who  are  thrown  out  of  employ  oy  the  change,  and  diminishes  those  of  the 
rest  of  the  community ;  for  industry  may  be  presumed  to  have  chosen  the  most 
profitable  channel.     I  will  go  further,  and  say,  that  a  forcible  diversion  of  the 
current  of  production  annihilates  many  additional  sources  of  profit  to  industry. 
Besides,  it  makes  a  vast  difference  to  the  public  prosperity,  whether  the  indivi- 
dual or  the  state  be  the  consumer.     A  thriving  and  lucrative  branch  of  industry 
promotes  the  creation  and  accumulation  of  new  capital ;  whereas,  under  the 
pressure  of  taxation,  and  accumulation  of  new  capital,  it  ceases  to  be  lucrative ; 
capital  diminishes  gradually  instead  of  increasing;  wealth  and  production  decline 
in  consequence,  and  prosperity  vanishes,  leaving  behind  the  pressure  of  unre- 
nit'inar  taxation.     Ricardo  has  endeavoured  to  introduce  the  unbending  maxima 

'if  geometrical  demonstration ;  in  the  science  of  political  economy,  there  is  no 
method  less  worthy  of  reliance. 

*  Chap.  V.  sect.  I.  J  Liv.  xx. 


CHAP.  VIII.  ON  CONSUMPTION.  453 

revenue  of  about  110  millions  of  dollars,  the  charges  of  collection 
amounted  to  no  more  than  10  millions  of  dollars;  yet,  under  his 
management,  there  were  250,000  persons  employed  in  the  collection: 
most  of  them,  however,  had  other  collateral  occupations.  The  charge 
was,  therefore,  about  10;  per  cent. ;  yet  this  is  much  higher  than  the 
rate  at  which  the  business  is  done  in  England.* 

Besides  the  charge  of  collectioq,  there  are  other  circumstances, 
that  are  burthensome  to  the  people  without  being  productive  of  gain 
to  the  public  revenue.  Law-suits,  imprisonment  and  other  preventive 
measures,  entail  additional  expense,  without  procuring  the  smallest 
increase  of  revenue.  And  this  addition  is  sure  to  fall  on  the  most 
necessitous  class  of  tax-payers ;  for  the  other  classes  pay  without 
litigation  or  constraint.  Such  odious  means  of  enforcing  the  pay- 
ment of  taxes  are  precisely  the  same  as  demanding  of  a  man  12 
dollars  because  he  has  not  wherewithal  to  pay  10  dollars.  Rigour 
is  never  necessary  to  enforce  taxation  where  it  presses  lightly  on  the 
resources  of  individuals;  but  when  a  state  is  so  unfortunate,  as  to  be 
obliged  to  impose  heavy  burthens,  of  two  evils,  the  process  of  levy 
by  distress  is  preferable  to  that  of  personal  constraint.  For  at  any 
rate,  by  seizing  and  selling  the  tax-payer's  goods,  and  thereby  raising 
the  arrears  of  his  taxes,  he  is  compelled  to  pay  no  more  than  is  due; 
and  the  whole  of  what  he  does  pay  goes  into  the  public  purse. 

On  this  account  it  is,  that  works  executed  by  the  public  requisi- 
tion of  labour,  as  the  roads  were  in  France  under  the  old  regime, 
are  always  a  mischievous  kind  of  taxation.  The  time  lost  by  the 
labourers  put  in  requisition  in  coming  three  or  four  leagues,  perhaps, 
to  their  work,  and  that  which  is  always  wasted  by  people  who  get 
no  pay,  and  work  against  their  inclination,  is  all  a  dead  loss  to  the 
public,  with  no  return  of  revenue.  Even  supposing  the  work  to  be 
well  executed,  there  is  often  more  loss  incurred  by  the  interruption 
of  the  regular  agricultural  pursuits,  than  gain  made  from  the  com- 
pulsory employment  that  has  been  substituted.  Turgot  called  upon 
the  surveyors  and  engineers  of  the  respective  provinces  for  an  esti- 
mate of  the  average  expense,  one  year  with  another,  of  keeping  up 
old  roads,  and  constructing  the  usual  number  of  new  ones,  directing 
them  to  make  their  calculations  on  the  most  liberal  scale.  The  esti- 
mate of  the  annual  expense,  made  in  compliance  with  his  orders, 
amounted  to  2  millions  of  dollars  for  the  whole  kingdom:  whereas, 
according  to  the  calculations  of  Turgot,  the  old  corvee  system  in- 
volved a  sacrifice  to  the  nation  of  8  millions  of  dollars.f 

Days  of  rest,  enjoined  either  by  law,  or  by  custom  and  usage  too 
powerful  to  be  infringed  upon,  are  another  kind  of  taxation,  pro- 
ductive of  nothing  to  the  public  purse. 

*  Under  the  system  of  Napoleon,  which  made  civilization  retrograde  to  this, 
as  well  as  in  most  other  particulars,  the  charges  of  collection  in  which  must  be 
included  the  charge  of  privation  and  the  irrecoverable  arrears,  weie  much  more 
considerable ;  but  the  full  extent  of  the  mischief  he  caused  is  not  yet  ascertained. 

f  Necker  reckons  the  corvee  at  four  millions  of  dollars  only ;  but  probably  he 
takes  account  of  nothing,  but  the  value  the  day-labour  exacted;  and  does  not 
notice  the  injury  resulting  from  this  method  of  supplying  the  public  necessities. 


454  ON  CONSUMPTION.  BOOK  III. 

3.  Such  as  press  impartially  on  all  classes. 

Taxation  being  a  burthen',  must  needs  weigh  lightest  on  each 
individual,  when  it  bears  upon  all  alike.  When  it  presses  inequitably 
upon  one  individual  or  branch  of  industry,  it  is  an  indirect,  as  well 
as  a  direct,  incumbrance ;  for  it  prevents  the  particular  branch  or 
the  individual  from  competing  on  even  terms  with  the  rest.  An 
exemption,  granted  to  one  manufacture,  has  often  been  the  ruin  of 
several  others.  Favour  to  one  is  most  commonly  injustice  to  all 
others. 

The  partial  assessment  of  taxation  is  no  less  prejudicial  to  the 
public  revenue,  than  unjust  to  individual  interests.  Those  who  are 
too  lightly  taxed,  are  not  likely  to  cry  out  for  an  increase;  and  those 
who  are  too  heavily  taxed,  are  seldom  regular  in  their  payments. 
The  public  revenue  suffers  in  both  ways. 

It  has  been  questioned  whether  it'  be  just  to  tax  that  portion  of 
revenues,  which  is  spent  on  luxuries,  more  heavily  than  that  spent  on 
objects  of  necessity.  It  seems  but  reasonable  to  do  so ;  for  taxation 
is  a  sacrifice  to  the  preservation  of  society  and  of  social  organization, 
which  ought  not  to  be  purchased  by  the  destruction  of  individuals. 
Yet,  the  privation  of  absolute  necessaries  implies  the  extinction  of 
existence.  It  would  be  somewhat  bold  to  maintain,  that  a  parent 
is  bound  in  justice  to  stint  the  food  or  clothing  of  his  child,  to  furnish 
his  contingent  to  the  ostentatious  splendour  of  a  court,  or  the  need- 
less magnificence  of  public  edifices.  Where  is  the  benefit  of  social 
institutions  to  an  individual,  whom  they  rob  of  an  object  of  positive 
enjoyment  or  necessity  in  actual  possession,  and  offer  nothing  in  re- 
turn, but  the  participation  in  a  remote  and  contingent  good,  which 
any  man  in  his  senses  would  reject  with  disdain  ? 

But  how  is  the  line  to  be  drawn  between  necessaries  and  super- 
fluities? In  this  discrimination,  there  is  the  greatest  difficulty,  for 
the  terms,  necessaries  and  superfluities,  convey  no  determinate  or 
absolute  notion,  but  always  have  reference  to  the  time,  the  place, 
the  age,  and  the  condition  of  the  party;  so  that,  were  it  laid  down 
as  a  general  rule,  to  tax  none  but  superfluities,  there  would  be  no 
knowing  where  to  begin  and  where  to  stop.  All  that  we  certainly 
know  is,  that  the  income  of  a  person  or  a  family  may  be  so  confined, 
as  barely  to  suffice  for  existence ;  and  may  be  augmented  from  that 
minimum  upwards  by  imperceptible  gradation,  till  it  embrace  every 
gratification  of  sense,  of  luxury,  or  of  vanity;  each  successive  grati- 
fication being  one  step  further  removed  from  the  limits  of  strict 
necessity,  till  at  last  the  extreme  of  frivolity  and  caprice  is  arrived 
at;  so  that,  if  it  be  desired  to  tax  individual  income,  in  such  manner 
as  to  press  lighter,  in  proportion  as  that  income  approaches  to  the 
confines  of  bare  necessity,  taxation  must  not  only  be  equitably  ap- 
portioned, but  must  press  on  revenue  with  progressive  gravity. 

In  fact,  supposing  taxation  to  be  exactly  proportionate  to  indi 
vidual  income,  a  tax  often  per  cent,  for  instance,  a  family  possessed 
of  60,000  dollars  per  annum  would  pay  6000  dollars  in  taxes,  leav 


CHAP.  VUL  ON  CONSUMPTION.  455 

ing  a  clear  residue  of  54,000  dollars  for  the  family  expenditure. 
With  such  an  expenditure,  the  family  could  not  only  live  in  abun- 
dance, but  could  still  enjoy  a  vast  number  of  gratifications  bv  no 
means  essential  to  happiness.  Whereas  another  family,  with  an 
income  of  60  dollars,  reduced  by  taxation  to  54  dollars  per  annum, 
would,  with  our  present  habits  of  life,  and  ways  of  thinking,  be 
stinted  in  the  bare  necessaries  of  subsistence.  Thus,  a  tax  merely 
proportionate  to  individual  income  would  be  far  from  equitable; 
and  this  is  probably  what  Smith  meant,  by  declaring  it  reasonable, 
that  the  rich  man  should  contribute  to  the  public  expenses,  not  merely 
in  proportion  to  the  amount  of  his  revenue,  but  even  somewhat  more. 
For  my  part,  I  have  no  hesitation  in  going  further,  and  saying,  that 
taxation  can  not  be  equitable,  unless  its  ratio  is  progressive.* 

4.  Such  as  are  least  injurious  to  reproduction. 

Of  the  values,  whereof  taxation  deprives  individuals,  a  great  part 
would,  undoubtedly,  if  left  at  the  disposal  of  the  individuals  them- 
selves, have  gone  to  the  satisfaction  of  their  wants  and  appetites; 
but  some  part  would  have  been  laid  by,  and  have  gone  to  the  further 
accumulation  of  productive  capital.  Thus,  all  taxation  may  be  said 
to  injure  reproduction,  inasmuch  as  it  prevents  the  accumulation  of 
productive  capital. 

This  effect  is  more  direct  and  serious,  whenever  the  tax-payer  is 
obliged  to  withdraw  a  part  of  the  capital  already  embarked,  for  the 
purpose  of  enabling  him  to  pay  the  tax ;  which  case,  as  Sismondi 
has  shrewdly  observed,  resembles  the  exaction  of  a  tithe  upon  grain 
at  seed-time,  instead  of  harvest-time.  Of  this  kind  is  the  tax  on 
legacies  and  successions.  An  heir,  succeeding  to  a  property  of 
20,000  dollars,  and  called  upon  for  a  tax  of  5  per  cent  upon  it,  will 
pay  it,  not  out  of  his  ordinary  income,  burthened  as  it  is  already 
with  the  ordinary  taxes,  but  out  of  the  inheritance,  which  is  thereby 
reduced  to  19,000  dollars.  Wherefore,  if  it  happen  to  be  a  vested 
capital  of  20,000  dollars  and  be  reduced  by  the  tax  to  19,000  dollars, 
the  national  capital  will  be  diminished  to  the  amount  of  the  1000 
dollars  thus  diverted,  into  the  public  exchequer. 

It  is  the  same  with  all  taxes  upon  the  transfer  of  property.  The 
owner  of  land  worth  20,000  dollars,  will  get  but  19,000  dollars  foi 
it,  if  the  purchaser  be  saddled  with  a  tax  of  5  per  cent.  The  seller 
will  have  a  disposable  capital  of  19,000  dollars  only,  in  lieu  of  land 
worth  20,000  dollars ;  and  the  national  capital  will  sustain  a  loss  of 
the  difference.  Should  the  purchaser  be  so  bad  an  arithmetician,  as 

*  Wealth  of  Nations,  book  v.  c.  2.  It  has  been  objected,  that  a  progressive 
scale  of  taxation  presents  the  disadvantage  of  operating  as  a  penalty  to  deter 
activity  and  frugality  from  the  accumulation  of  capital.  But  it  must  be  obvious, 
that  taxation  of  all  kinds  subtracts  a  portion  only,  and  generally  a  very  moderate 
portion,  of  the  addition  made  to  the  fortune  of  an  individual ;  so  that  every  one 
has  a  much  stronger  inducement  to  invite,  than  penalty  to  deter,  accumulation. 
If  a  person  had  to  pay  40  dollars  more  in  taxes,  upon  every  addition  of  200  do! 
lars  to  his  revenue,  still  he  would  multiply  his  enjoyments  in  a  larger  ratio  than 
his  sacrifices.  Vide  what  is  said  in  Sect.  4.  of  the  same  Chapter,  on  the  subject 
of  the  land-tax  of  England.  Ibid. 


466  ON  CONSUMPTION.  BOOK  III. 

to  pay  the  full  value  of  the  land,  without  allowing  for  the  tax,  he 
will  sacrifice  a  capital  of  21,000  dollars  in  the  purchase  of  value  to 
the  amount  of  but  20,000  dollars.  In  either  case,  the  loss  to  the 
national  capital  will  be  the  same;  although  in  the  latter,  it  will  fall 
upon  the  purchaser  instead  of  the  seller. 

Taxes,  upon  transfer,  besides  the  mischief  of  pressing  upon  capital, 
are  a  clog  to  the  circulation  of  property.  But,  has  the  public  any 
interest  in  its  free  circulation  ?  So  long  as  the  object  is  in  existence, 
is  it  not  as  well  placed  in  one  hand  as  in  another  1  Certainly  not 
The  public  has  a  perpetual  interest  in  the  utmost  possible  freedon 
of  its  circulation ;  because  by  that  means  it  is  most  likely  to  get  into 
the  hands  of  those,  who  can  make  the  most  of  it.  Why  does  one 
man  sell  his  land?  but  because  he  thinks  he  can  lay  out  the  value  to 
more  advantage  in  some  channel  of  productive  industry.  And  why 
does  another  buy  it?  but  because  he  wishes  to  invest  a  capital,  that 
is  lying  idle,  or  less  productively  vested ;  or  because  he  thinks  it 
capable  of  improvement.  The  transfer  tends  to  augment  the  national 
income,  because  it  tends  to  augment  the  income  of  the  two  contract- 
ing parties.  If  they  be  deterred  by  the  expenses  of  the  transfer, 
those  expenses  will  have  prevented  this  probable  increase  of  the 
national  income. 

Such  taxes,  however,  as  encroach  upon  the  productive  capital  of 
the  community,  and  consequently  abridge  the  demand  for  labour 
and  the  profits  of  industry  within  the  community,  possess,  in  a  very 
high  degree,  one  quality,  which  that  distinguished  political  econo- 
mist, Arthur  Young,  has  pronounced  to  be  an  essential  requisite  in 
taxation,  namely,  the  facility  and  cheapness  of  collection.*  Since 
taxation  presents  at  best  but  a  choice  of  evils,  a  nation,  heavily 
burthened,  will  probably  do  well,  in  submitting  to  a  moderate  impost 
upon  capital. 

.  Taxes  upon  law-proceedings,  and,  generally,  all  that  is  paid  to 
law-officers  and  agents,  are  taxes  upon  capital.  (1)    For  litigation  is 

*  This  is  the  reason,  why  it  has  been  found  practicable  to  raise  the  duty  on 
registration  to  its  present  high  scale.  Were  it  reduced,  the  product  to  the  ex- 
chequer would  probably  be  equally  great ;  and  the  nation  would  enjoy  the  benefit 
of  greater  freedom  of  circulation,  besides  experiencing  less  encroachment  upon 
its  capital 

(1)  Taxes  upon  law  proceedings  are  the  most  grievous  and  oppressive  that 
have  ever  been  resorted  to,  and  since  the  appearance  of  Mr.  Bentham's  work  on 
Law  taxes,  no  one,  who  has  read  it,  can  doubt  their  impolicy.  It  is  said  in  the 
Edinburgh  Review  (vol.  27,  page  358.),  "  that  one  day  Mr.  Rose,  in  Mr.  Piit'g 
presence,  took  Mr.  Bentham  aside,  and  informed  him  that  they  had  read  the 
pamphlet — that  its  reasoning  was  unanswerable — and  that  it  was  resolved  there 
should  be  no  more  such  taxes."  "  Yet  Budget  after  Budget,"  remarks  the  re- 
viewei,  "has  since  been  formed,  in  which  those  duties  have  made  a  part;  and 
Mr.  Pitt  himself  was  found  to  patronize  them  upon  his  return  to  office  in  1804." 
All  the  arguments  ever  brought  forward  in  support  of  this  objectionable  impost, 
have  been  triumphantly  refuted  by  Mr  Bentham,  in  this  work,  which  it  is  said 
;i>  the  same  Review,  "  for  closeness  of  reasoning,  has  not  perhaps  been  equalled, 
and  for  excellence  of  style,  has  certainly  never  been  surpassed." 

AMERICAN  EDITOR. 


CHAP.  VHI.  ON  CONSUMPTION.  457 

not  proportionate  to  the  income  of  the  suitors,  but  to  accident,  to 
the  complexity  of  family  interests,  and  to  the  imperfections  of  the 
law  itself. 

Forfeitures  are  equally  a  tax  on  capital. 

The  influence  of  taxation  upon  production  is  not  confined  to  the 
circumstance  of  diminishing  one  of  its  sources,  that  is  to  say,  capital ; 
it  operates  besides  in  the  nature  of  a  penalty,  inflicted  upon  certain 
branches  of  production  and  consumption.  Patents,  licenses  to  fol- 
low any  specified  calling,  and,  generally,  all  taxes,  that  bear  directly 
upon  industry,  are  liable  to  th;s  objection ;  but,  when  moderate  in 
their  ratio,  industry  will  contrive  to  surmount  such  obstacles  with- 
out much  difficulty. 

Nor  is  industry  affected  only  by  taxes  bearing  directly  upon  it ; 
it  is  indirectly  affected  by  such  also,  as  bear  upon  the  consumption 
of  the  articles  it  has  to  work  upon. 

The  products  consumed  in  reproduction  are,  for  the  most  part, 
those  of  primary  necessity;  and  taxes,  that  discourage  such  products, 
must  be  injurious  to  reproduction.  This  is  more  especially  the  case 
in  respect  to  those  raw  materials  of  manufacture,  which  can  only  be 
consumed  reproductively.  An  excessive  duty  upon  cotton,  checks 
the  production  of  all  articles,  wherein  that  substance  is  worked  up.* 

Brazil  is  a  country  abounding  in  animal  productions,  that  might 
be  cured  and  exported,  if  they  were  allowed  to  be  salted.  Its 
fisheries  are  very  productive,  and  cattle  so  abundant,  that  they  are 
killed  merely  for  the  sake  of  the  hide.  Indeed,  it  is  thence  that  our 
tanneries  in  Europe  are  in  a  great  measure  supplied.  But  the  salt 
duties  prevent  the  export  of  either  fish  or  meat ;  and  thus,  for  the 
sake  of  a  revenue  of  about  200,000  dollars  perhaps,  incalculable 
mischief  is  done  to  the  productive  powers  of  the  country,  as  well  as 
to  the  public  revenue,  which  they  might  be  made  to  yield. 

In  like  manner,  as  taxation  operates  in  the  nature  of  a  penalty,  to 
discourage  reproductive  consumption,  it  may  be  employed  to  check 
consumption  of  an  unproductive  kind ;  in  which  case  it  has  the 
two-fold  advantage,  of  subtracting  no  value  from  reproductive  in- 
vestment, and  of  rescuing  values  from  unproductive  consumption, 
to  be  employed  in  a  manner  more  beneficial  to  the  community. 
This  is  the  advantage  of  all  taxes  upon  luxuries-! 

*In  both  England  and  France,  premiums  are  given  upon  the  importation  of 
specific  raw  materials,  with  a  view  to  encourage  manufacture.  This  is  an  error 
on  the  opposite  side.  Upon  this  principle,  instead  of  a  tax  on  the  product  of 
iand,  a  bounty  should  be  given  to  all  who  would  take  the  trouble  to  cultivate , 
for  domestic  agriculture  furnishes  the  raw  material  of  most  manufactures;  as 
grain  in  particular,  which  is  transformed,  through  the  mediation  of  human  exer- 
tion, into  value  of  various  kinds,  exceeding  that  consumed  in  the  process.  Cus- 
toms or  duties  of  import  upon  any  article  whatever  are  equally  equitaoie  with 
direct  taxes  upon  land;  both  are  positive  evils;  but  the  lighter  the  tax,  the 
smaller  the  injury. 

•f-  When  it  is  absolutely  necessary  to  lay  a  tax  upon  a  particular  kind  of  con- 
sumption or  industry,  which  it  is  desirable  not  to  extinguish  altogether,  the  bur- 
then must  be  light  in  the  commencement,  and  increased  gradually  and  cau- 
39  3H 


458  ON  CONSUMPTION.  BOOK  HL 

When  sums,  levied  by  taxation  upon  capital,  instead  of  being 
simply  expended  by  the  government,  are  laid  out  upon  productive 
objects;  or,  when  individuals  contrive  to  make  good  the  deficiency 
out  of  their  private  savings,  the  positive  mischief  of  taxation  is  then 
balanced  by  a  counteracting  benefit.  The  proceeds  of  taxation  are 
reproductively  vested,  when  laid  out  in  improving  the  internal  com- 
munications, constructing  harbours,  or  other  such  works  of  utility. 
Governments  sometimes  employ  a  part  of  the  revenue  thus  realised 
in  adventures  of  industry.  Colbert  did  so,  when  he  made  advances  to 
the  manufacturers  of  Lyons.  The  governments  of  Hamburgh,  and 
of  some  other  places  in  Germany,  were  in  the  habit  of  embarking 
their  revenues  in  productive  undertakings;  and  it  is  said,  that  the 
authorities  of  Berne  were  in  the  habit  of  so  employing  a  part  of  its 
revenues  every  year:  but  such  instances  are  of  very  rare  occurrence. 

5.  Such  as  are  rather  favourable  than  otherwise  to  the  national 
morality;  that  is  to  say,  to  the  prevalence  of  habits,  useful  and  bene- 
ficial to  society. 

Taxation  influences  the  habits  of  a  nation,  in  the  same  way  as  it 
operates  upon  its  production  and  consumption,  that  is,  by  imposing 
a  pecuniary  penalty  upon  specified  acts ;  and  it  is,  moreover,  pos- 
sessed of  the  grand  requisites  to  render  punishment  effectual; 
namely,  moderation  and  difficulty  of  evasion.*  Without  reference, 
therefore,  to  the  purposes  of  finance  and  revenue,  it  is  a  powerful 
engine  in  the  hands  of  government,  for  either  corrupting  or  reform- 
ing the  national  morals,  and  may  be  directed  to  the  promotion  of 
idleness  or  industry,  extravagance  or  economy. 

The  tax  of  five  per  cent,  upon  all  lands  devoted  to  productive 
husbandry,  and  the  exemption  of  pleasure-grounds,  which  existed  in 
France  before  the  revolution,  operated,  of  course,  as  a  premium  upon 
luxury,  and  a  penalty  upon  agricultural  enterprise. 

The  tax  of  one  per  cent,  upon  the  redemption  of  ground-rents  and 
rent-charges  was  virtually  a  penalty  upon- an  act,  equally  advantage- 
ous to  the  parties  and  to  the  community  at  large ;  a  fine  upon  the 
meritorious  exertions  of  prudent  land-owners  to  pay  off  their  incum- 
brances. 

The  law  of  Napoleon,  exacting  from  each  scholar,  educated  in  a 
private  academy,  a  specified  payment  into  the  chests  of  the  public 
universities,  operated  as  a  penalty  upon  that  mode  of  education, 
which  alone  can  soften  national  manners  and  fully  develope  the 
faculties  of  the  human  mind.f 

tiously.  But  if  it  be  desired  to  repress  or  annihilate  a  mischievous  class  of  con- 
sumption or  industry,  the  full  weight  of  the  tax  should  be  thrown  upon  it  at 
once. 

*  The  efficacy  of  the  characteristics  of  punishment  has  been  placed  beyond 
all  doubt  by  Beccaria,  in  his  tract,  Dei  delitti  e  delle  pene. 

•I- This  species  of  tax  is  still  more  iniquitous,  because  it  must  fall  either  upon 
ornhans.  or  upon  parents,  who  are  disposed  to  submit  to  personal  privations,  for 
the  purpose  of  rearing  valuable  citizens ;  because  it  is  heavier  in  proportion  to  the 
number  of  children,  and  the  degree  of  privation  of  the  parent;  and  because  it  is 
disproportionate  to  the  means  of  the  individual,  poor  and  rich  being  taxed  alike. 


CHAP.  Vm.  ON  CONSUMPTION. 

When  a  government  derives  a  profit  from  the  licensing  of  lotteries 
and  gambling-houses,  what  does  it  else  but  offer  a  premium  to  a  vice 
most  fatal  to  domestic  happiness,  and  destructive  of  national  pros- 
perity? How  disgraceful  is  it,  to  see  a  government  thus  acting  as 
the  pander  of  irregular  desires,  and  imitating  the  fraudulent  conduct 
it  punishes  in  others,  by  holding  out  to  want  and  avarice  the  bait  of 
hollow  and  deceitful  chance!* 

On  the  contrary,  taxes,  that  check  and  confine  the  excesses  of 
vanity  and  vice,  besides  yielding  a  revenue  to  the  state,  operate  as 
a  means  of  prevention.  Humboldt  mentions  a  tax  upon  cock-fight- 
ing, which  yields  to  the  Mexican  government  45,000  dollars  per 
annum,  and  has  the  further  advantage  of  checking  that  cruel  and 
barbarous  diversion. 

Exorbitant  or  inequitable  taxation  promotes  fraud,  falsehood,  and 
perjury.  Well-meaning  persons  are  presented  with  the  distressing 
alternative,  of  violating  truth,  or  sacrificing  their  interests  in  favour 
of  less  scrupulous  fellow-citizens.  They  can  not  but  feel  involun- 
tary disgust,  at  seeing  acts,  in  themselves  innocent,  and  sometimes 
even  useful  and  meritorious,  branded  with  the  name,  and  subjected 
to  all  the  consequences,  of  criminality. 

These  are  the  principal  rules,  by  which  present  or  future  taxa- 
tion must  be  weighed,  with  a  view  to  the  public  prosperity.  After 
these  general  remarks,  which  are  applicable  to  taxation  in  all  its 

A  parent  of  moderate  fortune,  with  one  son  only,  pays  as  much  to  the  university 
as  all  the  rest  of  his  taxes  together :  if  he  have  more  sons  than  one,  he  is  still 
worse  off.  Thus  was  this  institution  converted  by  the  usurper  into  an  instru- 
ment of  fiscal  extortion,  sufficient  of  itself  to  have  insured  the  relapse  into  bar- 
barism, even  had  it  never  been  made  the  medium  of  instilling  false  ideas  or 
habits  of  servility.  The  pretext,  of  making  the  profits  of  private  establishments 
contribute  to  the  expense  of  compulsory  tuition,  is  by  no  means  satisfactory 
Supposing  the  tuition  of  the  public  Lycees  to  be,  of  all  others,  the  best  calculated 
to  train  up  useful  citizens ;  and,  admitting  the  justice  of  compelling  a  father,  or 
a  teacher  to  his  choice,  to  bring  his  pupil  to  the  lectures  of  the  authorized  pro- 
fessors, still  the  parties,  least  in  need  of  this  instruction,  are  those  already  placed 
in  private  establishments  of  education,  and  entrusted  to  teachers  of  their  own 
selection.  It  may  be  for  the  interest  of  the  community  at  large,  to  dispense  par- 
ticular classes  of  learning  gratuitously ;  but  it  is  the  greatest  oppression  to  force 
learning  upon  individuals,  and  make  them  pay  dear  for  it  into  the  bargain.  If 
any  one  class  in  particular  ought  to  defray  the  charge  of  moderate  gratuitous 
tuition,  it  is  that,  which  has  no  children  of  its  own,  and  is  in  the  reception  of 
all  the  benefits  of  social  life,  without  being  subject  to  all  its  burthens. 

*  Lotteries  and  games  of  hazard,  besides  occupying  capital  unprofitably,  in 
volve  the  waste  of  a  vast  deal  of  time,  that  might  be  turned  to  useful  account, 
and  this  item  of  expenditure  can  never  redound  to  the  profit  of  the  exchequer. 
They  have  the  further  mischievous  effect  of  accustoming  mankind  to  look  to 
chance  alone  for  what  their  own  talents  or  enterprise  might  attain ;  and  to  seek 
for  personal  gain,  rather  in  the  loss  of  others,  than  in  the  original  sources  of 
wealth.  The  reward  of  active  energy  appears  paltry  beside  the  bait  of  a  capital 
prize.  Moreover,  lotteries  ace  a  sort  of  tax,  that,  however  voluntarily  incurred, 
falls  almost  wholly  upon  the  necessitous;  for  nothing,  but  the  pressure  of  want 
can  drive  mankind  to  adventure,  with  the  chances  manifestly  against  them. 
The  sums  thus  embarked  are,  for  the  most  part,  the  portion  of  misery ,  or,  wha» 
is  worse,  the  fruit  of  actual  crime. 


460  ON  CONSUMPTION.  BOOK  IF 

branches,  it  may  be  useful  to  examine  the  various  modes  of  assess 
ment :  in  other  words,  the  methods  adopted  for  procuring  money 
from  the  subject ;  as  well  as  to  inquire,  upon  what  classes  of  the 
community  the  burthen  principally  falls. 


SECTION  IL 

Of  the  different  Modes  of  Assessment,  and  the   Classes  they  press  upc . 

respectively. 

Taxation,  as  we  have  seen  above,  is  a  requisition  by  the  govern- 
ment upon  its  subjects  for  a  portion  of  their  products,  or  of  their 
value.  It  is  the  business  of  the  political  economist  to  explain  the 
effects  resulting  from  the  nature  of  the  products  put  in  requisition, 
and  from  the  mode  of  apportioning  the  burthen,  as  well  as  upon 
whom  the  burthen  of  the  charge  really  falls,  since  it  must  inevitably 
fall  upon  some  one  or  other.  The  application  of  the  above  principles 
in  a  few  specific  instances  will  show,  how  they  may  be  applied  in 
all  others. 

The  public  authority  levies  the  values  taken  in  the  way  of  tax- 
ation, sometimes  in  the  shape  of  money,  sometimes  in  kind,  accord- 
ing to  its  own  wants,  or  the  ability  of  the  tax-payer.  In  whatever 
shape  it  is  paid,  the  actual  contribution  of  the  tax-payer  is  always 
of  the  value  of  the  article  he  gives.  If  the  government,  wanting  or 
pretending  to  want  corn,  or  leather,  or  woollens,  makes  a  requisi- 
tion of  those  articles  upon  the  tax-payer,  and  obliges  him  to  furnish 
them  in  kind,  the  tax  paid  amounts  exactly  to  what  the  payer  has 
expended  in  procuring  those  articles,  or  what  he  could  have  sold 
them  for,  if  the  government  had  not  taken  them  from  him.  This 
is  the  only  way  of  ascertaining  the  amount  of  the  tax,  whatever 
price  or  rate  the  government  may  set  upon  it  in  the  plenitude  of  its 
power. 

So,  likewise,  the  charges  of  collection,  in  whatever  shape  they 
may  appear,  are  always  an  aggravation  of  the  assessment,  whether 
they  accrue  to  the  profit  of  the  state  or  not.  If  the  tax-payer  be 
obliged  to  lose  his  time,  or  transport  his  goods,  for  the  purpose  of 
paying  the  tax,  the  whole  of  the  time  lost,  or  expense  of  transport, 
is  an  aggravation  of  the  tax. 

Among  the  contributions* that  a  government  exacts  from  its  sub- 
jects, should  likewise  be  comprised,  all  the  expenses  which  its  politi- 
cal conduct  may  bring  upon  the  nation.  Thus,  in  estimating  the 
expenses  of  war,  we  must  include  the  value  of  equipment  and 
pocket-money,  with  which  the  military  are  supplied  by  them- 
selves or  their  families ;  the  value  of  the  time  lost  by  the  militia ; 
the  sums  paid  for  exemption  and  substitutes;  the  full  charge  of 
quarters  for  the  troops;  the  pillage  and  destruction  they  maybe 
guilty  of;  the  presents  and  attentions  lavished  on  them  by  friends 
or  countrymen  on  their  return ;  to  all  which  must  be  added,  the 


CHAP.  VIII.  ON  CONSUMPTION.  401 

alms  extorted  from  pity  and  compassion  by  the  misery  consequent 
upon  such  misrule.  For,  in  fact,  none  of  these  values  need  have  been 
taken  from  the  members  of  the  community  under  a  better  system 
of  government.  And,  although  none  of  them  have  gone  into  the 
treasury  of  the  monarch,  yet  have  they  been  paid  by  the  people, 
and  their  amount  is  as  completely  lost,  as  if  they  had  contributed  to 
the  happiness  of  the  human  species. 

Hence,  we  may  form  some  notion  of  the  extent  of  the  national 
sacrifices.  But,  from  what  source  are  they  drawn  ? — Doubtless, 
either  from  the  annual  product  of  the  national  industry,  land,  and 
capital ;  that  is  to  say,  from  the  national  revenue  ;  or  from  the  values 
previously  saved  and  accumulated ;  that  is  to  say,  from  the  national 
capital. 

When  taxation  is  moderate,  the  subject  can  not  only  pay  his 
taxes  wholly  out  of  his  revenue,  but  will  not  be  altogether  disabled 
from  besides  saving  some  part  of  that  revenue :  and  although  some 
of  the  tax-payers  may  be  obliged  to  trench  upon  their  capital  for 
the  payment  of  their  taxes,  the  loss  to  the  general  stock  is  amply 
reimbursed  by  the  savings,  which  this  happy  state  of  affairs  allows 
others  to  effect. 

But  it  is  far  otherwise,  when  military  despotism  or  usurped  au- 
thority extorts  excessive  contributions.  Gieat  part  of  the  taxes 
is  then  taken  from  the  vested  and  accumulated  capital ;  and,  if  the 
country  be  long  subjected  to  its  domination,  the  revenues  of  each 
successive  year  are  progressively  reduced,  and  the  ruin  and  depopu- 
lation of  the  country,  will  recoil  upon  its  rulers,  unless  their  down- 
fall be  accelerated  by  their  own  folly  and  excesses. 

Under  the  protecting  influence  of  just  and  regular  government, 
on  the  contrary,  there  is  a  progressive  annual  enlargement  of  the 
profits  and  revenues,  on  which  taxation  is  to  be  levied ;  and  that 
taxation,  without  any  alteration  of  its  ratio,  gradually  becomes  more 
productive  by  the  mere  multiplication  of  taxable  products. 

Nor  is  the  government  more  deeply  interested  in  moderating  the 
ratio  of  taxation,  than  its  impartial  assessment  upon  every  class  of 
individual  revenue,  and  its  equal  pressure  upon  all.  In  fact,  when 
revenue  is  partially  affected,  taxation  sooner  reaches  the  extreme 
limits  of  the  ability  of  some  classes,  while  others  are  scarcely  touched 
at  all :  it  becomes  vexatious  and  destructive,  before  it  arrives  at  the 
highest  practical  ratio.  The  burthen  is  galling,  not  because  of  its 
weight,  but  because  it  does  not  rest  upon  all  shoulders  alike. 

The  different  methods  employed  to  reach  individual  revenues, 
may  be  classed  under  two  grand  divisions — direct,  and  indirect, - 
taxation ;  the  former  is  the  absolute  demand  of  a  specific  portion  of 
an  individual's  real  or  supposed  revenue ;  the  latter,  a  demand  of  a 
specific  sum  on  each  act  of  consumption  of  certain  specified  objects, 
to  which  that  income  may  be  applied. 

In  neither  case,  is  the  real  subject  of  taxation  that  commodity,  on 
which  the  estimate  is  made,  and  which  forms  the  grounu-work  of 
the  demand  for  the  tax ;  or  of  necessity  that  value,  whereof  a  part  is 
39* 


462  ON  CONSUMPTION.       .  BOOK  III. 

taken  by  the  state ;  individual  revenue  is  the  only  real  subject  of  tax- 
ation; and  the  specific,  .commodity  is  selected  only  as  a  more  or  less 
effective  means  of  discovering  and  attacking  that  revenue.  If  indi- 
vidual honesty  could  in  every  case  be  relied  on,  the  matter  would  be 
simple  enough ;  all  that  would  be  requisite  would  be,  to  ask  each 
person  the  amount  of  his  annual  profits,  that  is  to  say,  his  annual  reve- 
nue. The  contingent  of  each  would  be  readily  settled,  and  one  tax 
only  necessary,  which  would  be  at  the  same  time  the  most  equitable, 
and  the  cheapest  in  the  collection.  This  was  the  method  adopted  at 
Hamburgh,  before  that  city  fell  into  misfortune ;  but  it  can  never  be 
practised,  except  in  a  republic  of  small  extent,  and  very  moderately 
taxed. 

As  a  means  of  assessing  direct  taxation  proportionately  to  the 
respective  revenues  of  the  tax-payers,  governments  sometimes  com- 
pel the  production  of  leases  by  landlords,  or,  where  there  is  no  lease, 
set  a  value  on  the  land,  and  demand  a  certain  proportion  of  that  value 
from  the  proprietor ;  this  is  called  a  land-tax.*  Sometimes  they 
estimate  the  revenue  by  the  rent  of  the  habitation,  and  the  number 
of  servants,  horses,  and  carriages  kept,  and  make  the  assessment 
accordingly.  This  is  called  in  France,  the  tax  on  moveables.f 
Sometimes  they  calculate  the  profits  of  each  person's  profession  or 
calling,  by  the  extent  of  the  population  and  district  where  it  is  fol- 
lowed. This  is  called  in  France,  the  license-tax. J  All  these  differ- 
ent modes  of  assessment  are  expedients  of  direct  taxation. 

In  the  assessment  of  indirect  taxation,  and  such  as  is  intended  to 
bear  upon  specific  classes  of  consumption,  the  object  itself  is  alone 
attended  to,  without  regard  to  the  party  who  may  incur  the  charge. 
Sometimes  a  portion  of  the  value  of  the  specific  product  is  demanded 
at  the  time  of  production ;  as  in  France,  in  the  article  of  salt.  Some- 
times the  demand  is  made  on  entry,  either  into  the  state,  as  in  the 
duties  of  import;  §  or  into  the  towns  only,  as  in  the  duties  of  entry.)] 
Sometimes  a  tax  is  demanded  of  the  consumer  at  the  moment  of 
transfer  to  him  from  the  last  producer;  as  in  the  case  of  the  stamp 
duty  in  England,  and  the  duty  on  theatrical  tickets  in  France. 
Sometimes  the  government  requires  a  commodity  to  bear  a  particular 
mark,  for  which  it  makes  a  charge,  as  in  the  case  of  the  assay-mark 
of  silver,  and  stamp  on  newspapers.  Sometimes  it  monopolizes  the 
manufacture  of  a  particular  article,  or  the  performance  of  a  particular 
kind  of  business ;  as  in  the  monopoly  of  tobacco,  and  the  postage  of 
letters.  Sometimes,  instead  of  charging  the  commodity  itself,  it 
charges  the  payment  of  its  price  ;  as  in  the  case  of  stamps  on  receipts 
and  mercantile  paper.  All  these  are  different  ways  of  raising  a  reve- 
nue by  indirect  taxation  ;  for  the  demand  is  not  made  on  any  person 
in  particular,  but  attaches  upon  the  product  or  article  taxed.TI 

*  Contribution-fonciere.  f  Mobiliere. 

J  Les  Patentes.  §  Douanes.  \\  Octroi. 

IT  Not  because  they  affect  the  tax-payer  indirectly;  for  this  circumstance  is 
equally  applicable  to  many  items  of  direct  taxation  ;  as,  for  instance,  to  the  license- 
tax  fpntentes,')  part  of  which  falls  indirectly  upon  the  consumer,  who  buys  of 
*i«  Jirensed  dealer. 


CHAP.  VIIL  ON  CONSUMPTION.  463 

It  may  easily  be  conceived,  that  a  class  of  revenue,  which  may 
escape  one  of  these  taxes,  will  be  affected  by  another;  and  that  the 
multiplicity  of  the  forms  of  taxation  gives  a  great  approximation  to 
its  equal  distribution ;  provided  always,  that  all  are  kept  within  the 
bounds  of  moderation. 

Every  one  of  these  modes  of  assessment  has  peculiar  advantages 
and  peculiar  disadvantages,  besides  the  general  evil  of  all  taxation, 
to  wit,  that  of  appropriating  a  part  of  the  products  of  the  community 
to  purposes  little  conducive  to  its  happiness  and  reproductive  powers. 
Direct  taxation,  for  instance,  is  cheap  in  the  collection ;  but,  on  the 
other  hand,  it  is  paid  with  reluctance,  and  must  be  enforced  with 
considerable  harshness  and  rigour.  Besides,  it  bears  very  inequitably 
upon  the  individual.  A  rich  merchant,  charged  only  120  dollars  for 
nis  license,  makes  an  annual  profit,  perhaps,  of  20,000  dollars;  while 
the  retailer,  who  can  scarcely  be  supposed  to  make  more  than  300 
dollars,  is  charged  for  his  license  20  dollars,  which  is  the  lowest 
rate.  The  revenue  of  the  landholder  is  already  affected  by  the 
land-tax,  before  it  is  further  reduced  by  the  tax  on  moveables ;  while 
the  capitalist  is  subjected  to  the  latter  burthen  only. 

Indirect  taxation  has  the  recommendation  of  being  levyable  with 
more  ease,  and  with  less  apparent  vexation  or  hardship.  All  taxes 
are  pud  with  reluctance,  because  the  equivalent  to  be  expected  for 
them,  'hat  is,  the  security  afforded  by  good  order  and  government, 
is  a  negative  benefit,  which  does  not  immediately  interest  indivi- 
duals ;  tb:m  the  benefit  afforded  consists  rather  in  prevention  of  ill, 
than  ;n  the  diffusion  of  good.  But  the  buyer  of  the  taxed  commodity 
does  not  suspect  himself  to  be  paying  for  the  protection  of  govern- 
ment, which  probably  he  cares  very  little  about ;  but  merely  for  the 
commodity  itself,  which  is  an  object  of  his  urgent  desire,  although, 
in  fact,  that  pri  'e  is  aggravated  by  the  tax.  The  inducement  to 
consume  is  strorg  enough  to  include  the  demand  of  the  government; 
and  he  readily  parts  with  a  value,  that  procures  an  imnjediate 'grati- 
fication. 

It  is  this  circumstance,  that  makes  such  taxes  appear  to  be  volun 
tary.  And,  indeed,  so  much  so  were  they  considered  by  the  United 
States  before  tluur  emancipation,  that,  although  the  right  of  the 
British  Parliament  to  tax  America  without  her  consent  was  stoutly 
denied,  yet  she  was  ready  to  acknowledge  the  right  of  imposing 
taxes  upon  consumption,  which  every  body  could  evade  if  he 
pleased,  by  abstaining  from  the  articles  taxed.*  Personal  taxes  are 

*  Vide  Examination  of  B.  Franklin,  at  the  bar  of  the  House  of  Commons, 
1767.  Mfmmrs,  vol.  i.  Appendix  6.  (a) 

(a)  Tlio  denial  went  to  the  whole  of  what  is  called  internal  taxation;  the 
admission,  which  appears  on  the  part  of  the  American  agents  to  have  been  a 
concossi«  i)  for  the  sake  of  peace,  went  no  farther  than  to  external  taxes  for  the 
regulation  of  trade.  And  even  this  concession  on  the  part  of  some  of  the  agents 
\vns  M,-ry  srxm  retracted,  and  the  right  of  taxation  denied  in  toto.  Ibid.  vol.  u 
iaxsim  T 


4G4  ON  CONSUMPTION.  BOOK  Til. 

viewed  in  a  different  light,  and  have  more  of  the  character  of  osten- 
sible spoliation. 

Indirect  taxation  is  levied  piecemeal,  and  paid  by  individuals 
according  to  their  respective  ability  at  the  moment.  It  involves 
none  of  the  perplexity  of  separate  assessments  on  each  province, 
department,  or  individual;  or  of  the  inquisitorial  inspection  into 
private  circumstances;  nor  does  it  make  one  person  suffer  for  the 
default  of  another.  The  inconvenience  of  appeals  and  private  ani- 
mosities, as  well  as  of  levy  by  distress  or  imprisonment,  is  avoided 
altogether. 

Another  advantage  of  indirect  taxation  is,  that  it  enables  the 
government  to  bias  the  different  classes  of  consumption;  favouring 
such  as  promote  the  public  prosperity,  as  does  reproductive  con- 
sumption of  all  kinds;  and  checking  such  as  tend  to  public  im- 
poverishment, as  do  all  kinds  of  unproductive  consumption;  dis- 
couraging the  costly  and  insipid  indulgences  of  the  wealthy,  and 
promoting  the  simpler  and  cheaper  enjoyments  of  the  poor  and 
industrious. 

It  has  been  objected  to  indirect  taxation,  that  it  entails  a  heavy 
expense  of  collection  and  management,  and  a  large  establishment 
of  clerks,  officers,  directors,  and  subordinate  agents ;  but  it  is  ob- 
servable, that  these  charges  may  be  vastly  reduced  by  good  admin- 
istration. The  excise  and  stamp-duties  in  England  cost  but  3|-  per 
cent,  in  the  collection,  in  the  year  1799.*  There  are  few  classes 
of  direct  taxation,  that  are  managed  so  economically  in  France. 

It  has  been  further  objected,  that  its  product  is  uncertain  and 
fluctuating;  whereas,  the  public  exigencies  require  a  regular  and 
certain  supply:  but  there  has  never  been  any  lack  of  bidders,  when- 
ever such  taxes  have  been  let  out  to  farm ;  and  experience  has 
shown,  that  the  product  of  every  class  of  taxation  may  always  be 
nearly  estimated  and  safely  reckoned  upon,  except  in  very  rare  and 
extraordinary  emergencies.  Besides,  taxes  on  consumption  are 
necessarily  various;  so  that,  the  deficit  of  one  is  covered  by  the 
surplus  of  another. 

Indirect  taxation  is,  however,  an  incentive  to  fraud,  and  obliges 
governments  to  brand  with  the  character  of  guilt,  actions  that  are 
innocent  in  their  nature;  and,  consequently,  to  resort  to  a  distressing 
severity  of  punishment.  But  this  mischief  is  never  considerable, 
until  taxation  has  grown  excessive,  so  as  to  make  the  temptation  to 
fraud  counterbalance  the  danger  incurred.  All  excess  of  taxation 
is  attended  with  this  evil ;  that,  without  enlarging  the  receipts  of 
(he  public  purse,  it  multiplies  the  sufferings  of  the  population. 

It  may  be  observed,  that  consumption,  and,  consequently,  indivi- 
dual revenue,  are  unequally  affected  by  indirect,  as  well  as  by  direct, 
taxation :  for  the  private  consumption  of  many  articles  is  not  pro- 

*  Gamier,  Traduction  de  Smith,tom.  iv.  p.  438.  According  to  Arthur  Young1, 
Uie  stamp-duties  in  his  time  cost  but  5,691/.  in  the  collection,  upon  the  receipt 
of  l,330,0()OZ. ;  which  is  less  than  \  per  cent. 


CHAP.  VIIL  ON  CONSUMPTION. 

portionate  to  the  revenue  of  the  consumer.  The  possessor  of  an 
annual  revenue  of  20.000  dollars  does  not  consume  in  the  year  an 
hundred  times  as  much  salt,  as  the  possessor  of  a  revenue  of  200 
dollars  only.  But  this  inequality  may  be  obviated  by  the  variety 
of  taxes  on  consumption.  Moreover,  it  is  to  be  recollected,  that 
such  taxes  fall  upon  incomes  already  charged  with  the  taxes  on 
land  and  pn  moveables.  A  person,  whose  whole  income  is  derived 
from  land,  in  respect  to  which  he  is  taxed  in  the  first  instance,  pays 
on  the  same  income  a  second  tax  under  the  head  of  moveables;  and 
a  third  on  every  taxed  article,  that  he  buys  and  consumes. 

Although  all  these  kinds  of  taxes  be  paid  in  the  outset,  by  the 
persons  of  whom  they  are  demanded  by  the  public  authority,  it 
would  be  wrong  to  suppose,  that  they  always  ultimately  fall  on  the 
original  payers,  who,  in  many  instances,  are  not  the  parties  really 
charged,  but  merely  advance  the  tax  in  the  first  instance,  and  con- 
trive to  get  indemnified  wholly  or  partially  by  the  consumers  of 
.heir  own  peculiar  products.  But  the  rate  of  indemnity  is  infinitely 
diversified  by  the  respective  circumstances  of  the  individuals. 

Of  this  diversity,  we  may  form  some  notion,  by  the  consideration 
of  the  following  general  facts : 

When  the  taxation  of  the  producers  of  a  specific  commodity  ope- 
rates to  raise  its  price,  part  of  the  tax  is  paid  by  the  consumers  of 
the  commodity.  If  its  price  be  nowise  raised,  it  falls  wholly  upon 
the  producers.  If  the  commodity,  instead  of  being  thereby  ad- 
vanced in  price,  is  deteriorated  in  quality,  a  portion  of  the  tax  at 
least  must  fall  upon  the  consumer;  for  a  purchase  of  inferior  quality 
at  equal  price  is  equivalent  to  a  purchase  of  equal  quality  and  superior 
price. 

Every  addition  to  price  must  needs  reduce  the  number  of  those 
possessed  of  the  ability  to  purchase ;  or,  at  any  rate,  must  diminish 
the  extent  of  that  ability.*  There  is  much  less  salt  consumed,  when 
it  sells  for  three  cents,  than  when  it  sells  for  one  cent  per  Ib.  Now, 
the  ratio  of  the  demand  to  the  means  of  production  being  lowered, 
productive  agency  in  this  department  is  worse  paid ;  that  is  to  say, 
the  master-manufacturer  of  salt,  and  all  the  subordinate  agents  and 
labourers,  together  with  the  capitalist  that  supplies  the  funds,  and 
the  landlord  of  the  premises  where  the  concern  is  carried  on,  must 
be  content  with  smaller  profits,  because  their  product  is  less  in  de- 
mand.f  The  productive  classes,  indeed,  naturally  strive  to  indemnify 

*  Supra,  Book  II.  chap.  I. 

f  The  position,  that  the  interest  of  the  capitalist  and  the  rent  of  the  landlord 
are  thereby  lowered,  however  paradoxical  it  may  appear,  is  nevertheless  quite 
true.  It  may  be  asked,  why  should  the  capitalist,  who  makes  the  advance  to 
the  manufacturer,  or  the  landlord,  whose  land  he  occupies,  lower  their  demands, 
in  consequence  of  a  portion  of  the  product  being  subtracted  by  taxation  1  But 
is  no  allowance  to  be  made  for  consequent  delay  of  payment,  claims  of  allow- 
ances,  failures,  and  legal  expenses?  All,  or  at  least  a  portion,  of  which  must 
fall  upon  the  landlord  and  capitalist:  and  often  without  any  suspicion  on  theit 
part,  that  they  are  thus  made  to  participate  in  the  burthen.  In  a  complex 
organization  the  pressure  of  taxation  is  often  imperceptible. 

31 


466  ON  CONSUMPTION.*  BOOK  EL 

themselves  to  the  amount  of  the  tax ;  but,  they  can  never  succeed  to 
the  full  extent,  because  the  intrinsic  value  of  the  commodity,  that,  I 
mean,  which  goes  to  pay  the  charges  of  production,  is  really  dimin- 
ished. So  that,  in  fact,  the  tax  upon  an  article  never  raises  its  tota" 
price  by  the  full  amount  of  the  tax ;  because,  to  do  so,  the  total 
demand  must  remain  the  same ;  which  it  never  can  do.  Wherefore, 
in  such  cases,  the  tax  falls,  partly  upon  those,  who  still  continue  to 
consume,  notwithstanding  the  increase  of  price,  and  partly  upon  the 
producers,  who  raise  a  less  product,  and  find  that,  in  consequence  of 
the  reduced  demand,  they  really  obtain  less  on  the  sale,  when  the 
tax  comes  to  be  deducted.  The  public  revenue  gains  the  whole 
excess  of  price  to  the  consumer,  and  the  whole  of  the  profit,  which 
the  produce  is  thus  compelled  to  resign.  The  effect  is  analogous  to 
that  of  gunpowder,  which  at  the  same  time  propels  the  bullet,  and 
makes  the  piece  recoil. 

By  laying  a  tax  upon  the  consumption  of  woollens,  their  consump- 
tion is  reduced,  and  the  revenue  of  the  wool-grower  suffers  in  con- 
sequence. It  is  true,  he  may  take  to  a  different  kind  of  cultivation, 
but  we  may  fairly  suppose,  that,  under  all  the  circumstances  of  soil 
and  situation,  the  rearing  of  sheep  was  the  most  profitable  kind  of 
culture ;  otherwise,  he  would  not  have  chosen  it.  A  change  in  the 
mode  of  cultivation  must,  therefore,  involve  a  loss  of  revenue.  But 
the  clothier  and  the  capitalist  will  each  be  subjected  to  a  portion  of 
the  loss  resulting  from  the  tax. 

Each  concurrent  producer  is  affected  by  a  tax  on  an  article  of 
consumption,  in  proportion  only  to  the  share  he  may  have  in  raising 
the  product  taxed. 

When  the  owner  of  the  soil  furnishes  the  greatest  part  of  the 
value  of  a  product,  as  he  does  in  respect  to  products  consumed  nearly 
in  the  primary  state,  he  it  is  that  bears  the  greatest  part  of  that  por- 
tion of  the  tax,  which  falls  on  the  producers.  A  duty  of  entry  upon 
the  wine  imported  into  the  towns,  falls  heavily  upon  the  wine- 
grower ;  but  an  exorbitant  excise  upon  lace  will  affect  the  flax-grower 
in  a  degree  hardly  perceptible ;  whereas,  all  the  other  producers,  the 
dealers,  the  operative  and  speculative  manufacturers,  who  create 
the  far  greater  proportion  of  the  value  of  the  lace,  will  suffer  very 
severely. 

When  the  value  of  a  product  is  partly  of  foreign,  and  partly  of 
domestic  creation,  the  domestic  producers  bear  nearly  the  whole 
burthen  of  the  tax.  A  tax  upon  cottons  in  France  will  reduce  the 
earnings  of  her  cotton  manufacturers,  by  lowering  the  demand  for 
their  product ;  thus,  part  of  the  tax  will  fall  on  them.  But  the  wages 
of  the  productive  agency  of  the  cotton-growers  in  America  will  be 
very  little  affected  indeed,  unless  there  be  a  concurrence  of  other 
circumstances.  In  fact,  the  tax  would  reduce  the  consumption  in 

This  shows  the  danger  of  adherence  to  invariable  principle ;  and  of  abandon- 
ing the  experimental  method  of  Smith,  and  constructing  a  system  of  theoretical 
•led  action,  as  some  recent  English  writers  have  done,  in  imitation  of  the  econiv 
oiists  of  the  last  century. 


CHAP.  VnL  ON  CONSUMPTION.  467 

France  10  per  cent,  perhaps,  and  demand  in  America  1  per  cent 
only,  if  the  demand  from  France  were  but  one-tenth  of  the  general 
demand  upon  America. 

The  taxation  of  an  object  of  consumption,  if  it  be  one  of  primary 
necessity,  operates  upon  the  price  of  almost  all  other  products,  and 
consequently  falls  upon  the  revenues  of  all  the  other  consumers. 
An  octroi  upon  meat,  corn,  and  fuel,  at  their  entry  into  a  town, 
enhances  the  price  of  every  thing  manufactured  in  it;  while  a  tax 
upon  the  tobacco  there  consumed  makes  no  other  commodity  dearer; 
the  producers  and  consumers  of  tobacco  alone  are  affected;  and  for 
a  very  plain  reason;  the  producer  who  indulges  in  superfluities  has 
to  maintain  a  competition  with  another,  who  abstains  from  them ; 
but,  if  he  pays  a  tax  upon  necessaries,  he  need  fear  no  competition ; 
for  his  neighbours  will  be  all  in  the  same  predicament. 

The  direct  taxation  of  the  productive  classes  must,  &  fortiori, 
affect  the  consumers  of  their  products,  but  can  never  raise  the  prices 
of  those  products  so  much,  as  completely  to  indemnify  the  producer; 
because,  as  I  have  repeatedly  explained,  the  increased  price  abridges 
the  demand,  and  the  contraction  of  the  demand  reduces  the  profits 
of  all  the  productive  agency,  that  has  been  exerted  in  the  supply. 

Of  the  concurrent  producers  of  a  specific  product,  some  can  more 
easily  evade  the  effect  of  the  tax  than  others.  The  capitalist,  whose 
capital  is  not  absolutely  vested  and  sunk  in  a  particular  business,  may 
withdraw  it  and  transfer  it  elsewhere,  from  a  concern  that  yield's 
him  a  reduced  interest,  or  has  become  more  hazardous.  The  ad- 
venturer or  master-manufacturer  may,  in  many  cases,  liquidate  his 
account,  and  transfer  his  labour  and  intelligence  to  some  other 
quarter.  Not  so  the  land-owner  and  proprietor  of  fixed  capital.* 
An  acre  of  vineyard  or  corn-land  will  only  produce  a  given  quantity 
of  corn  or  wine,  whatever  be  the  ratio  of  taxation ;  which  may  taks 
the  %  or  even  f  of  the  net  produce,  or  rent  as  it  is  called,  and  yet 
the  land  be  tilled  for  the  sake  of  the  remaining  £  or  £.f  The  rent, 
that  is  to  say,  the  portion  assigned  to  the  proprietor,  will  be  reduced, 
and  that  is  all.  The  reason  will  be  manifest  to  any  one,  who  con- 
siders, that  in  the  case  supposed,  the  land  continues  to  raise  and 
supply  the  market  with  the  same  amount  of  produce  as  before ;  while 
on  the  other  hand,  the  motives  in  which  the  demand  originates 
remain  just  as  they  were.J  If,  then,  the  intensity  of  supply  and 

*  Vide  Supra,  Book  I.  chap.  4.  for  the  explanation  of  the  mode,  in  which  the 
land-holder  concurs  in  production  by  the  advance  of  his  land ;  and  must,  there- 
fore, be  included  amongst  the  productive  classes. 

fThe  cultivation  need  never  be  abandoned  altogether,  until  taxation  tafceh 
more  than  the  whole  surplus  product  applicable  to  the  payment  of  rent ;  it  is 
then  worth  nobody's  while  to  cultivate  at  all ;  for  not  only  could  the  proprietor 
receive  nothing,  the  whole  being  appropriated  by  the  state;  but  me  fanner 
would  be  compelled  to  pay  to  the  state  a  higher  rent,  than  he  could  afford. 

f  There  is  this  peculiarity  attending  the  products  of  agricultural  industry,  v'z. 
that  their  average  price  is  not  raised  by  growing  scarcity,  because  population  in 
eure  to  decline  co-extensively  with  the  declining  supply  of  human  aliment;  so 
that  the  demand  necessarily  diminishes  equally  with  the  supply.  Thus  it  is  not 


468  ON  CONSUMPTION.  BOOK  HL 

demand  must  both  remain  the  same,  in  spite  of  any  increase  or 
diminution  of  the  ratio  of  the  direct  taxation  upon  the  land,  the 
price  of  the  product  supplied  will  likewise  remain  unchanged,  and 
nothing  but  a  change  of  price  can  saddle  the  consumer  with  any 
portion  whatever  of  that  taxation.* 

Nor  can  the  proprietor  evade  the  tax  even  by  the  sale  of  the 
estate ;  for  the  price  or  purchase-money  will  be  calculated  according 
to  the  revenue  which  may  be  left  him  by  taxation.  The  purchaser 
makes  his  estimate  according  to  the  net  revenue,  charges  and  taxes 
deducted.  If  the  ordinary  interest  on  such  investments  of  capital 
be  five  per  cent.,  an  estate  that  before  would  have  sold  for  20,000 
dollars,  will  fetch  but  16,000  dollars  when  it  comes  to  be  charged 
with  an  annual  tax  of  200  dollars ;  for  its  actual  product  to  the  pro- 
prietor will  not  exceed  800  dollars.  The  effect  is  precisely  the  same, 
as  if  government  were  to  appropriate  to  itself  1-5  of  the  land  in  the 
country ;  which  would  make  no  difference  at  all  to  the  consumers 
of  its  produce.f 

But  property  in  dwelling-houses  is  otherwise  circumstanced ;  a 
tax  upon  the  ownership  raises  the  rents ;  for  a  house,  or  rather  the 
satisfaction  it  yields  to  the  occupier,  is  a  product  of  manufacture  and 
not  of  land ;  and  the  high  rate  of  house-rent  reduces  the  production 
and  consumption  of  houses,  in  the  like  manner  as  of  cloth  or  any 
other  manufactured  commodity.  Builders,  finding  their  profits  re- 
duced, will  build  less ;  and  consumers,  finding  the  accommodation 
dearer,  will  content  themselves  with  inferior  lodging. 

From  all  those  circumstances,  we  may  judge  of  the  temerity  of 
asserting  as  a  general  maxim,  that  taxation  falls  exclusively  upon 
any  specific  class  or  classes  of  the  community.  It  always  falls  upon 
those  who  can  find  no  means  of  evasion ;  for  every  one  naturally 
tries  to  shift  the  burthen  off  his  own  shoulders  if  possible  ;  but  the 
ability  to  evade  it  is  infinitely  varied,  according  to  the  various  forms 

found,  that  wheat  is  dearer  in  those  countries  where  great  part  of  the  land  is 
thrown  out  of  tillage,  than  where  it  is  all  in  a  high  state  of  cultivation.  In 
Spain,  wheat  is  not  now  dearer,  than  in  the  time  of  Ferdinand  and  Isabella, 
though  it  is  there  produced  in  much  less  abundance ;  for  the  number  of  mouths 
to  be  fed  is  also  much  less.  On  the  contrary,  the  lands  of  both  England  and 
France  were  less  cultivated  in  the  middle  ages  than  at  the  present  day ;  and 
their  product  of  grain  less  abundant;  yet  it  does  not  appear,  from  a  comparison 
of  other  values,  that  it  was  then  much  dearer  than  at  present.  The  product  and 
the  population  were  both  greatly  inferior ;  and  the  slackness  of  demand  counter- 
balanced the  slackness  of  supply. 

*  It  is  a  mistake  to  suppose,  that  the  tax  must  bear  equally  upon  the  proprietor 
and  the  farmer,  who  finds  the  requisite  capital  and  industry ;  for  taxation  can 
iiave  no  effect,  either  in  reducing  the  quantity  of  land  capable  of  cultivation,  or 
in  multiplying  the  number  of  farmers,  able  and  willing  to  undertake  it;  and,  if 
neither  supply  nor  demand  in  this  branch  be  varied,  the  ratio  of  the  rent  must 
needs  remain  unaltered  likewise. 

fThe  economists  were  quite  correct  in  their  position,  that  a  land  or  territorial 
tax  falls  wholly  upon  the  net  product,  and  consequently,  upon  the  proprietors ; 
but  they  were  wrong  in  extending  the  doctrine  so  far  as  to  assert,  that  all  othn\ 
taxes  were  defrayed  out  of  the  same  fund. 


CHAP.  VI1L  ON  CONSUMPTION.  469 

of  assessment,  and  the  position  of  each  individual  in  the  social 
system.  Nay,  more;  it  varies  at  different  times  even  in  the  same 
channel  of  production.  When  a  commodity  is  in  great  request,  the 
holder  will  not  part  with  the  possession,  unless  indemnified  for  all 
his  advances,  of  which  the  tax  he  has  paid  is  a  part:  he  will  take 
nothing  short  of  a  full  and  complete  indemnity.  But,  if  any  unlooked- 
for  occurrence  should  happen  to  lower  the  demand  for  his  product, 
he  will  be  glad  enough  to  take  the  tax  upon  himself,  for  the  sake  of 
quickening  the  sale.  There  are  few  things  so  unsteady  and  variable, 
as  the  ratio  of  the  pressure  of  taxation  upon  each  respective  class  of 
the  community.  Those  Writers,  who  have  maintained,  that  it  bears 
upon  any  one  or  more  classes  in  particular,  or  in  any  fixed  or  cer- 
tain proportion,  have  found  their  theory  contradicted  by  experience 
at  every  turn. 

Furthermore,  the  effects  I  have  been  describing,  and  which  are 
equally  consonant  to  experience  and  to  reason,  are  uniform  in  their 
operation  and  of  equal  duration  with  the  causes  in  which  they  origi- 
nate. The  owner  of  land  will  never  be  able  to  saddle  the  consumers 
of  its  produce  with  any  part  of  his  land-tax ;  not  so  the  manufacturer 
A  manufactured  commodity  will  invariably  feel  a  diminution  in  its 
consumption,  in  consequence  of  the  price  being  raised  by  taxation, 
supposing  other  circumstances  to  be  stationary;  and  its  production 
will  be  a  less  profitable  occupation.  A  person,  who  is  neither  pro- 
ducer nor  consumer  of  an  object  of  luxury,  will  never  bear  any 
portion  whatever  of  the  tax  that  may  be  laid  upon  it. — What,  then, 
must  we  think  of  a  proposition,  unfortunately  sanctioned  by  the  ap- 
probation of  an  illustrious  body,*  that  has  too  much  neglected  this 
branch  of  science,  namely,  that  it  is  of  little  importance  whether  a 
tax  press  upon  one  branch  of  revenue  or  another,  provided  it  be  of 
long  standing ;  because  every  tax  in  the  end  affects  every  class  of 
revenue,  in  like  manner,  as  bleeding  in  the  arm  reduces  the  circu- 
lating blood  of  the  whole  human  frame.  The  object  of  comparison 
has  no  analogy  whatever  with  taxation.  Social  wealth  is  not  a 
fluid,  tending  constantly  to  find  a  level.  It  rather  resembles  the 
vegetable  creation,  which  admits  of  the  loss  of  a  limb  without  the 
destruction  of  the  trunk,  and  in  which  the  loss  is  more  to  be  la- 
mented, if  the  branch  be  productive,  than  if  it  be  barren. — But  the 
tree  will  bear  cutting  and  hacking  in  every  part,  before  it  becomes 
barren  all  over,  or  necessarily  falls  into  decay.  This  is  a  far  more 
apposite  case ;  but  neither  will  do  to  reason  upon.  Comparisons  are 
not  proofs,  but  mere  illustrations,  tending  to  make  that  intelligible, 
which  can  be  made  out  in  proof  without  their  assistance. 

When  speaking  of  taxes^upon  products,  which  I  have  sometimes 
called  taxes  upon  consumption,  although  not  paid  entirely  in  all 
cases  by  the  consumer,  I  have  hitherto  made  no  mention  of  the 
particular  stage  of  production,  at  which  the  tax  may  be  demanded. 

*  The  French  institute,  which  awarded  the  prize  of  merit  to  an  Essay  of  HL 
Canard,  in  support  of  this  doctrine. 
40 


170  ON  CONSUMPTION.  BOOK  III. 

or  of  the  consequence  of  this  particular  circumstance,  which  deserves 
a  little  of  our  attention. 

Products  increase  in  value  progressively,  as  they  pass  through  the 
hands  of  the  different  concurrent  producers:  and  even  the  most 
simple  undergo  a  variety  of  modifications,  before  they  arrive  at  a 
fit  state  for  consumption.  Wherefore,  a  tax  does  not  take  the  pro- 
portion of  the  value  of  a  product  which  it  professes,  unless  it  be 
levied  at  the  precise  moment,  when  it  has  arrived  at  the  full  value, 
and  has  undergone  all  the  productive  modifications.  If  a  tax  be  im- 
posed on  the  raw  material  in  the  outset,  proportioned,  not  to  its  then 
value,  but  to  the  value  it  is  about  to  receive,  the  producer,  in  whose 
hands  it  happens  to  be,  is  obliged  to  advance  a  tax  out  of  proportion 
to  the  value  in  hand ;  which  advance,  besides  being  highly  incon- 
venient to  himself,  is  refunded  with  equal  inconvenience  bv  every 
successive  producer,  till  it  reach  the  hands  of  the  last,  who  is  in  turn 
but  partially  indemnified  by  the  consumer.  And  there  is  this  further 
mischief  in  such  an  advance  of  tax;  that  it  prevents  the  class  of  in- 
dustry, which  is  called  upon  to  make  it,  from  being  originally  set  in 
motion,  without  a  larger  capital  than  the  nature  of  the  business 
requires ;  and  that  the  additional  interest  of  the  capital,  which  must 
be  paid,  part  by  the  consumers,  and  part  by  the  producers,  is  so 
much  additional  taxation,  without  any  addition  of  public  revenue.* 

Thus,  both  theory  and  experience  lead  to  the  conclusion  precisely 
opposite  to  that  drawn  by  the  sect  of  economists;  and  show  that  por- 
tion of  the  tax,  which  presses  upon  the  consumer's  revenue,  to  be 
always  the  more  burthensome,  the  earlier  it  is  levied  in  the  process 
of  production. 

Direct  and  personal  taxes,  which  operate  to  raise  the  price  of 
necessaries,  or  such  as  fall  immediately  upon  necessaries,  are  liable 
to  this  inconvenience  in  the  highest  degree :  for  they  oblige  each 
producer  t6  advance  the  personal  tax  on  all  the  producers  that  have 
preceded  him:  so  that  the  same  amount  of  capital  will  set  in  motion 
a  smaller  amount  of  industry ;  and  the  tax-payers  pay  the  tax,  plus 
a  compound  interest  upon  it,  yielding  no  benefit  to  the  exchequer. 

Nor  is  this  mere  theory :  the  neglect  of  these  principles  has  occa- 
sioned may  serious  practical  errors;  like  that  of  the  Constituent 

*  The  duty  on  the  import  of  cotton  into  France  was,  in  1812,  as  high  as  200 
dollars  per  bale,  one  bale  with  another.  There  were  several  manufactories  ave- 
raging a  consumption  of  two  bales  per  day ;  and  as  the  amount  of  duty  was  a 
dead  outlay,  during  the  whole  interval  between  the  purchase  of  the  raw  material 
and  the  realization  of  the  manufactured  product,  which  may  be  taken  at  twelve 
months,  they  must  each  have  required  an  additional  capital  of  120,000  dollars 
more  than  would  have  been  requisite  but  for  th*  tax ;  the  interest  of  which  they 
must  have  charged  to  the  consumer,  or  have  paid  out  of  their  own  profits.  The 
whole  of  it  was  so  much  addition  of  price  to  the  French  consumer,  and  aggra- 
vation of  the  pressure  of  taxation,  unproductive  of  a  single  additional  dollar  to 
the  public  revenue.  The  heaviest  of  the  national  burthens  of  that  period  were 
ihose  that  made  the  least  figure  in  the  annual  budget  of  the  ministry  :  the  people 
suffered,  in  very  many  instances,  without  knowing  the  nature  of  tie  grievance, 
as  in  the  example,  just  cited. 


CHAP.  VIH  ON  CONSUMPTION.  471 

Assembly  of  France,  which  carried  to  excess  the  system  of  direct 
taxation,  especially  upon  land ;  being  misled  by  the  prevailing  and 
fashionable  doctrine  of  the  economists; — that  land  is  the  source  of 
all  wealth,  the  agriculturist  the  only  productive  labourer,  and  France 
naturally  and  essentially  an  agricultural  country. 

It  seems  to  me  that,  in  the  present  stage  of  political  economy,  the 
principles  of  taxation  will  be  more  correctly  laid  down  as  follows: 

Taxation  is  the  taking  'a  portion  of  the  general  product  of  the 
community,  which  never  returns  to  the  community  in  the  channel 
of  consumption. 

It  takes  from  the  community  over  and  above  the  values  actually 
brought  into  the  exchequer,  the  charges  of  collection,  and  the  per 
sonal  trouble  it  entails ;  together  with  all  those  values,  of  which  it 
obstructs  the  creation. 

The  privation  resulting  from  taxation,  whether  voluntary  or  com- 
pulsory, affects  the  tax-payer  in  his  quality  of  producer,  whenever 
it  operates  to  curtail  his  profits ;  that  is  to  say,  his  income  or  reve- 
nue; and  affects  him  in  his  character  of  consumer,  whenever  it 
increases  his  expenditure,  by  raising  the  prices  of  products. 

And,  since  an  increase  of  expenditure  is  precisely  the  same  thing 
as  a  diminution  of  revenue,  whatever  is  taken  by  taxation  may  be 
said  to  be  so  much  deducted  from  the  revenues  of  the  community. 

In  a  great  majority  of  cases,  the  tax-payer  is  affected  by  taxation 
in  both  his  characters,  of  producer  and  consumer;  and,  when  he  can 
not  manage  to  pay  the  public  burthens  out  of  his  revenue,  along  with 
his  personal  consumption,  he  must  encroach  upon  his  capital.  When 
this  encroachment  of  one  person  is  not  counterbalanced  by  the  sav- 
ings of  another,  the  wealth  of  the  community  must  gradually  decline. 

The  individual  actually  paying  the  tax  to  the  tax-gatherer  is  not 
always  the  party  really  charged  with  it,  at  least,  not  the  party 
charged  with  the  whole  that  is  paid.  He  frequently  does  no  more 
than  advance  the  tax,  either  wholly  or  partially;  being  afterwards 
reimbursed  by  the  other  classes  of  the  community,  in  a  very  com- 
plicated way,  and  perhaps  after  a  vast  variety  of  intermediate  opera- 
tions ;  so  that  a  great  many  persons  are  paying  portions  of  the  tax, 
at  a  time  when  probably  they  least  suspect  it,  either  in  the  shape  of 
the  advanced  price  of  commodities,  or  of  personal  loss,  which  they 
feel  but  can  not  account  for. 

The  individuals,  on  whose  revenues  the  tax  ultimately  falls,  are 
the  real  tax-payers,  and  contribute  value  greatly  exceeding  the  suti« 
that  is  brought  into  the  exchequer,  even  with  the  addition  of  the 
charges  of  collection.  The  misconduct  of  the  government  in  the 
matter  of  taxation,  is  proportioned  to  this  excess  of  the  payment 
above  the  receipt. 

A  country  heavily  taxed  may  be  considered  in  the  same  light  as 
one  labouring  under  natural  impediments  to  production.  With  a 
heavy  charge  of  production,  it  raises  a  very  small  product  Per 
son*/  exertion,  capital,  and  the  productive  agency  of  land  are  all 


472  ON  CONSUMPTION.  BOOK  III 

but  poorly  recompensed :  and  more  is  expended  in  earning  a  less 
profit. 

It  is  worth  while  on  this  head  to  recur  to  the  principles  explained 
in  the  preceding  book,*  when  describing  the  difference  between 
positive  and  relative  dearness.  High  price  resulting  from  taxation 
is  positive  dearness:  it  indicates  a  smaller  product  raised  by  the 
efforts  of  a  larger  amount  of  productive  agency.  Besides  which, 
taxation  generally  occasions  a  cotemporary  advance  of  commodi- 
ties in  comparison  with  silver ;  that  is  to  say,  raises  their  money 
price:  and  for  this  reason;  because  specie  is  not  an  annual,  regene- 
rative product,  like  those  that  are  swallowed  up  by  taxation.  Go- 
vernment is  not  a  consumer  of  specie,  except  when  it  happens  to 
export  it  for  the  payment  of  its  armies,  or  foreign  subsidies:  it 
refunds  in  the  purchases  it  makes  all  the  specie  it  obtains  by  taxa- 
tion: but  the  value  levied  is  never  refunded,  f  Wherefore,  since 
taxation  paralyzes  one  part  of  the  sources  of  production,  and  effects 
the  rapid  destruction  of  the  product  of  the  other,  when  its  ratio  is 
excessive,  it  must  gradually  render  products  more  scarce  in  propor- 
tion to  the  specie,  which  is  not  varied  in  quantity  by  the  operation. 
Now,  whenever  the  commodities  to  be  circulated  become  fewer  in 
proportion  to  the  specie  that  is  to  circulate  them,  their  relative  value 
to  the  specie  must  rise ;  the  same  money  will  purchase  a  smaller 
quantity  of  products.  • 

It  might  be  supposed,  that  such  a  superabundance  of  gold  and 
silver  specie  ought  to  operate  in  exoneration  of  the  public :  yet  it 
can  not  have  that  effect;  for,  however  plentiful  it  may  be  in  pro- 
portion to  other  commodities,  still  individuals  can  only  obtain  it  by 
giving  their  own  products  in  exchange,  and  the  raising  of  those  pro- 
ducts has  become  more  difficult  and  more  costly. 

Besides,  when  money-prices  grow  high,  and  specie  is  conse- 
quently reduced  in  relative  value,  it  gradually  takes  its  departure, 
and  becomes  scarcer,  like  all  other  commodities:  and  thus  a  country, 
burthened  with  a  taxation  too  heavy  for  its  productive  powers,  is 
lirst  drained  of  its  commodities,  and  next  of  its  specie;  till  it  gradu- 
ally reaches  the  extreme  of  penury  and  depopulation. 

The  careful  study  of  these  principles  will  give  some  insight  into 
the  mode,  in  which  the  annual  and  really  monstrous  expenditure  of 
national  governments,  in  modern  times,  has  habituated  the  subject 
to  severer  toil  and  exertion,  without  which  it  would  be  impossible 
that,  after  providing  for  the  subsistence,  comfort,  and  pleasures  of 
himself  and  family,  according  to  the  habits  of  the  time  and  place,  he 
should  be  able  to  meet  the  consumption  of  the  state,  and  the  collate- 
ral waste  and  destruction  it  occasions,  the  amount  of  which  it  is 
impossible  to  ascertain,  though  in  the  larger  states  it  is  confessed!) 
enormous. 

*  Book  II.  chap.  3. 

j-  For  the  reason  already  stated,  viz.  that  purchases,  made  with  the  proceeds 
of  taxation,  are  acts  o*"  exchange,  and  not  of  restitution. 


CHAP.  Vm.  ON  CONSUMPTION.  473 

This  very  profusion,  though  it  proves  the  vices  and  defects  of  the 
political  system  and  organization,  has  been  attended  with  one  advan- 
tage at  any  rate;  it  has  operated  to  stimulate  the  approximation  to 
perfection  in  the  art  of  production,  by  obliging  mankind  to  turn  the 
natural  agents  to  better  account.  In  this  point  of  view,  taxation  hasr 
certainly  helped  to  develope  and  enlarge  the  human  faculties;  so 
that,  when  the  progress  of  political  science  shall  limit  taxation  to  the 
supply  of  real  public  wants  only,  the  improvements  in  the  art  of 
production  will  prove  a  vast  accession  to  human  happiness.  But, 
should  the  abuses  and  complexity  of  the  political  system  lead  to  the 
prevalence,  extension,  increase,  and  consolidation  of  oppressive  and 
disproportionate  taxation,  it  is  much  to  be  feared,  that  it  may  plunge 
again  into  barbarism  those  nations,  whose  productive  powers  are 
now  the  most  astonishing;  and  the  condition  of  the  labouring  classes, 
who  are  always  the  bulk  of  the  community,  may  in  such  nations 
present  a  picture  of  drudgery  so  incessant  and  toilsome,  as  to  make 
them  cast  a  wistful  eye  upon  the  liberty  of  savage  existence ;  which, 
though  it  offer  no  prospect  of  domestic  comfort,  at  least  promises 
emancipation  from  perpetual  exertion  to  supply  the  prodigality  of  a 
public  expenditure,  yielding  to  them  no  satisfaction,  and,  perhaps 
even  operating  to  their  prejudice,  (a) 


SECTION  III. 
Of  Taxation  in  Kind. 

Taxation  in  kind  is  the  specific  and  immediate  appropriation  of  a 
portion  of  the  gross  product  to  the  public  service. 

It  has  this  advantage,  of  calling  on  the  producer  only  for  what  he 

(a)  This  ground  of  apprehension  is  certainly  just.  It  has  been  doubted  by 
many  political  theorists,  whether  the  total  remission  of  taxation  would  operate 
to  improve  the  condition  of  the  inferior  productive  classes:  inasmuch,  as  all  that 
is  now  paid  into  the  public  exchequer,  would  quickly  be  appropriated  by  the 
classes,  who  should  happen  to  be  in  possession  of  those  sources  and  means  of 
production,  which  are  capable  of  exclusive  appropriation ;  and  the  owners  of  mere 
personal  agency  would  nowise  benefit.  But  it  should  be  observed,  that  private 
persons  have  an  immediate  personal  interest  in  making  the  most  of  their  property ; 
and  will,  on  their  own  account,  so  conduct  themselves,  as  to  promote  their  own 
advantage,  which  is  the  advantage  of  the  public  also,  where  equality  of  personal 
right  prevails.  Wherefore,  the  strongest  impulse  of  private  cupidity  can  never 
operate  to  retard  the  advance  of  productive  power  and  national  wealth,  or  to 
make  them  retrograde ;  but  just  the  contrary.  Thus,  although  the  present  con- 
dition of  the  mere  labourer  might  not  be  improved,  his  means  of  bettering  his 
condition  would  be  enlarged,  by  the  growing  increase  of  wealth,  and  by  greater 
freedom  of  personal  agency.  The  extortion  of  private  cupidity,  unaided  by 
authority,  must,  for  its  own  sake,  regulate  itself  by  the  ability  of  the  object  of 
it :  but  that  of  public  authority  is  inexorable,  and  is  restrained  by  no  considera- 
tion of  immediate  personal  interest.  Besides,  personal  suffering,  occasioned  by 
the  hard-heartedness  of  primate  task-masters,  is  not  so  strong  an  incentive  of 
odium  against  public  authority,  as  where  that  authority  is  itsfcJ  the  ostensible 
task-master.  T 

40*  3K 


474  ON  CONSUMPTION.  BOOK  IE. 

has  actually  in  hand,  in  the  identical  shape  which  it  happens  to  be 
under.  Belgium,  after  its  conquest  by  France,  found  itself  at  times 
unable  to  pay  its  taxes,  in  spite  of  abundant  crops ;  the  war,  and  the 
prohibition  of  exportation,  obstructed  the  sale  of  its  produce,  which 
the  government  enforced  by  demanding  payment  in  money ;  whereas, 
the  taxes  might  have  been  collected  without  difficulty,  had  the 
government  been  content  to  take  payment  in  kind. 

It  has  the  further  advantage  of  making  it  equally  the  interest  of 
government  and  of  the  farmer  to  obtain  plentiful  crops,  and  improve 
the  national  agriculture.  The  levying  of  taxes  in  kind  in  China,  was 
probably  the  origin  of  the  peculiar  encouragement,  bestowed  by  its 
government  upon  the  agricultural  branch  of  production.  But,  why 
Favour  one  branch,  when  all  are  equally  entitled  to  protection,  be- 
cause all  contribute  to  bear  the  public  burthens  1  And,  why  has  not 
government  an  equal  interest  in  supporting  the  other  branches, 
which  it  takes  the  trouble  of  extinguishing  ? 

It  has  likewise  the  advantage  of  excluding  all  exaction  and  injus- 
tice in  the  collection;  the  individual,  when  he  gathers  in  his  harvest, 
Knows  exactly  what  he  has  to  pay ;  and  the  state  knows  what  it  has 
to  receive. 

This  tax,  which  might  appear  at  first  sight  to  be  of  all  others  the 
most  equitable,  is  nevertheless  of  all  others  the  most  inequitable ;  for 
it  makes  no  allowance  for  the  advances  made  in  the  course  of  pro 
duction,  but  is  taken  upon  the  gross,  instead  of  the  net,  product 
Take  two  farmers  in  different  branches  of  cultivation ;  the  one  farm 
ing  tillage-land  of  moderate  quality;  his  expenses  of  cultivation, 
amounting,  one  year  with  another,  say  to  1600  dollars,  and  the  gross 
product  of  his  farm,  say  to  2400  dollars,  so  as  to  yield  him  a  net  pro- 
duct of  800  dollars  only ;  the  other  farming  pasturage  or  wood-land, 
yielding  a  gross  product  of  precisely  the  same  amount  of  2400  dol- 
lais:  with  an  expense  of  cultivation,  amounting,  perhaps,  to  but  400 
dollars,  leaving  him  a  net  product,  one,  year  with  another,  of  2000 
dollars.  Suppose  a  tax  in  kind  to  be  imposed  in  the  ratio  of  1-12  of 
the  annual  product  of  land  of  all  descriptions  indiscriminately.  The 
former  will  have  to  pay  in  sheaves  of  corn  to  the  amount  of  200  dol- 
lars; the  latter  will  pay,  in  cattle  or  in  wood,  an  equal  value  of  200 
dollars.  What  is  the  result?  The  one  will  have  paid  the  fourth  part 
of  a  net  revenue  of  800  dollars ;  the  other  but  a  tenth  part  of  a  net 
revenue  of  2000  dollars. 

The  revenue,  that  each  person  has  for  his  own  share,  is  the  net 
residue  only  after  replacing  the  capital  he  has  embarked,  whatever 
may  be  its  amount.  Is  the  gross  amount  of  the  sales  he  effects  in 
the  year  the  annual  income  of  the  merchant?  Certainly  not;  all 
the  income  he  gets  is  the  surplus  of  his  receipts  above  his  ad- 
vances ;  on  this  surplus  alone  can  he  pay  taxes,  without  ruin  to  his 
concerns. 

The  ecclesiastical  tithe  levied  in  France  under  the  old  system 
was  liable  to  this  inconvenience  in  part  only.  It  attached  neither 
upon  meadow,  nor  wood-land,  nor  kitchen-ground,  nor  many  other 


CHAP.  VHI.  ON  CONSUMPTION.  475 

kinds  of  cultivation;  and  in  some  places  was  1-18,  in  others  1-15 
or  1-10  of  the  gross  product;  so  that  the  real,  was  corrected  by  the 
apparent  inequality. 

The  marechal  de  Vauban,  in  his  work  entitled,  Dixime  Roijak,  a 
book  replete  with  just  views,  and  well  worth  the  study  of  those 
who  manage  national  finances,  proposes  a  tax  of  1-20  of  the  pro- 
duct of  the  land,  which,  in  times  of  great  emergency,  might  be 
raised  to  1-10.  But  this  proposition  was  made  as  a  substitute  for  a 
still  more  inequitable  system :  namely,  the  saddling  of  the  lands  of 
the  commonalty  with  the  whole  tax,  and  altogether  exempting  the 
lands  of  the  nobles  and  clergy.  The  public-spirited  writer,  who 
had  occasion,  in  his  character  of  engineer,  to  become  personally 
acquainted  with  every  part  of  France,  speaks  most  feelingly  of  trie 
hardships  resulting  from  the  land-tax  (a)  of  those  days.  And  there 
is  no  doubt,  that  the  adoption  of  his  plan  at  that  time  would  have 
been  a  vast  relief  to  the  country.  But  it  was  disregarded.  Why  ? 
Because  every  courtier  had  an  interest  to, resist  it:  and  this  fine 
country  was  left  to  flounder  through  its  distresses.  The  conse- 
quence was,  a  heavier  loss  of  population  from  famine,  than  from  the 
sword,  in  the  war  of  the  Spanish  succession. 

The  difficulty  and  expense  of  collection,  together  with  the  abuses 
to  which  it  is  liable,  are  another  objection  to  taxation  in  kind.  The 
immense  number  of  agents  must  open  a  fine  field  for  peculation. 
The  government  may  be  imposed  upon,  in  respect  to  the  amount 
collected,  upon  the  subsequent  sale  and  disposal,  in  respect  to  the 
quantity  damaged,  as  well  as  in  the  charges  of  storing,  preservation ' 
and  carriage.  If  the  tax  be  farmed  to  contractors,  the  profits  and 
expenses  of  numberless  farmers  and  contractors  must  all  fall  upon 
the  public.  The  prosecution  of  the  farmers  and  contractors  would 
require  the  active  vigilance  of  administration.  'A  gentleman  of 
great  fortune,'  says  Smith,  'who  lived  in  the  capital,  would  be  in 
danger  of  suffering  much  by  the  neglect,  and  more  by  the  fraud,  of 
his  factors  and  agents,  if  the  rents  of  an  estate  in  a  distant  province 
were  to  be  paid  to  him  in  this  manner.  The  loss  of  the  sovereign, 
from  the  abuse  and  depredation  of  his  tax-gatherers,  would  neces- 
sarily be  much  greater.'* 

Various  other  objections  have  been  urged  against  taxation  in 
kind,  which  it  would  be  useless  and  tedious  fo  enumerate.  I  shall 
only  take  the  liberty  of  remarking  the  violent  operation  upon  re- 
lative price,  which  must  follow  from  so  vast  a  quantity  of  produce 
being  thrown  upon  the  market  by  the  agents  of  the  public  revenue, 
who  are  notoriously  equally  improvident  as  buyers  and  as  sellers. 
The  necessity  of  clearing  the  storehouses  to  make  room  for  the 
fresh  crop,  and  the  ever  urgen*demands  upon  the  public  puise, 
would  oblige  them  to  sell  below  the  level,  to  which  the  price  would 

*  Wealth  of  Nations,  book  v.  c.  2.  art.  I.     

(a)  Taille  ;  for  the  explanation  of  this  tax,  vide  Wealth  of  Nations,  book  v  c 
2.  art.  2,  T. 


476  ON  CONSUMPTION.  BOOK  III. 

naturally  be  brought  by  the  rent  of  the  land,  the  wages  of  labour, 
and  the  interest  of  the  capital,  engaged  in  agriculture;  and  private 
dealers  would  be  unable  to  maintain  the  competition.  Such  taxation 
not  only  takes  from  the  cultivator  a  portion  of  his  product,  but  pie- 
vents  his  turning  the  residue  to  good  account. 


SECTION  IV. 
Of  the  Territorial  or  Land -Tax  of  England. 

In  the  year  1692,  whicn  was  four  years  after  the  happy  revolu- 
tion, that  placed  the  prince  of  Orange  upon  the  British  throne,  a 
general  valuation  was  made  of  the  income  of  all  the  land  in  the 
country;  and,  upon  that  valuation,  the  land-tax  continues  to  be 
levied  to  this  day ;  so  that  the  tax  of  four  shillings  in  the  pound, 
upon  the  rents  of  land,  is  a  fifth  of  its  rent  in  1692,  and  not  of  the 
actual  rent  at  the  present  day. 

It  may  easily  be  conceived  how  much  this  tax  must  operate  to 
encourage  improvements  of  the  land.  An  estate  that  has  been 
improved  so  as  to  double  the  rent,  does  not  pay  double  the  original 
tax ;  neither  does  it  pay  a  less  tax  if  it  be  suffered  to  fall  into  neglect 
and  impoverishment ;  thus,  it  operates  as  a  penalty  upon  negligence. 

To  this  fixation  of  the  tax,  many  writers  attribute  the  high  state 
of  the  cultivation  of  the  land  in  England :  and  doubtless  it  may  have 
done  much  to  promote  improvement.  But,  what  would  be  thought 
of  a  government  that  should  say  to  a  tradesman  in  a  small  way  of  busi- 
ness, "You  are  trading  in  a  small  way  upon  a  small  capital,  and  con- 
sequently pay  very  little  in  direct  taxes.  Borrow,  and  enlarge  your 
capital,  extend  your  dealings, and  increase  your  profits  as  much  as  you 
can,  and  we  will  not  charge  you  with  any  increase  of  taxes.  Nay,  fur- 
ther, when  your  heirs  succeed  to  the  business,  and  have  still  further 
extended  it,  they  shall  be  assessed  at  precisely  the  same  rate,  and  shall 
continue  subject  to  the  same  taxes  only."  All  this  might  be  a  vast 
encouragement  to  trade  and  manufacture ;  but  would  there  be  any 
equity  in  such  a  proceeding?  and  might  they  not  advance  without 
such  assistance?  Has  not  England  herself  presented  the  example 
of  a  still  more  rapid  improvement  in  commercial  and  manufacturing 
industry,  without  any  such  unjust  partiality?  A  land-owner,  by 
attention,  economy,  and  intelligence,  improves  his  annual  income  to 
the  amount,  say  of  1000  dollars:  if  the  state  claim  a  fifth  of  this 
advance,  there  will  still  be  a  bonus  of  800  dollars  to  stimulate  and 
reward  his  exertions.  t 

It  would  be  easy  to  put  cases,  in  which  the  tax,  becoming  by  its 
fixation  disproportionate  to  the  means  of  the  tax-payers  and  the 
condition  of  the  soil,  might  be  productive  of  as  much  mischief,  as 
it  has  done  good  in  other  instances:  where  it  would  operate  to 
throw  out  of  cultivation  a  class  of  land,  that,  by  one  cause  or  other,  had 
become  incompetent  to  pay  the  same  ratio  of  taxation.  We  have 


CHAP.  IX.  ON  CONSUMPTION.  477 

seen  an  example  of  this  in  Tuscany.  There,  a  census  or  terrier  was 
made  in  1496,  wherein  the  plains  and  valleys  were  rated  very  low, 
on  account  of  the  frequent  floods  and  inundations,  which  prevented 
any  regular  and  profitable  cultivation ;  while  the  uplands,  that  were 
then  the  only  cultivated  spots,  were  rated  very  high.  Since  then, 
the  torrents  and  inundations  have  been  confined  by  drainage  and 
embankment,  and  the  plains  reduced  to  fertility;  their  produce, 
being  comparatively  exempt  from  tax,  came  to  market  cheaper  than 
that  of  the  uplands,  which,  consequently,  were  unable  to  maintain 
the  competition,  under  the  pressure  of  disproportionate  taxation, 
and  have  gradually  been  abandoned  and  deserted.*  Whereas,  had 
the  tax  been  adjusted  to  the  change  of  circumstances,  both  might 
have  been  cultivated  together. 

In  speaking  of  a  tax,  peculiar  to  a  particular  nation,  I  have  used 
it  merely  in  illustration  of  general  and  universal  principles. 


CHAPTER  IX. 

OP  NATIONAL  DEBT. 

| 

SECTION  I. 
Of  the  Contracting  Debt  by  National  Authority,  and  of  its  general  Effect. 

THERE  is  this  grand  distinction  between  an  individual  borrower 
and  a  borrowing  government,  that,  in  general,  the  former  borrows 
capital  for  the  purpose  of  beneficial  employment,  the  latter  for  the 
purpose  of  barren  consumption  and  expenditure.  A  nation  bbr- 
rows,  either  to  satisfy  an  unlooked-for  demand,  or  to  meet  an  extra- 
ordinary emergency ;  to  which  ends,  the  loan  may  prove  effectual 
or  ineffectual:  but,  in  either  case,  the  whole  sum  borrowed  is  so 
much  value  consumed  and  lost,  and  the  public  revenue  remains 
burthened  with  the  interest  upon  it. 

Melon  maintains,  that  a  national  debt  is  no  more  than  a  debt  from 
the  right  hand  to  the  left,  which  nowise  enfeebles  the  body  politic. 
But  he  is  mistaken ;  the  state  is  enfeebled,  inasmuch  as  the  capital 
lent  to  its  government,  having  been  destroyed  in  the  consumption 
of  it  by  the  government,  can  no*  longer  yield  any  body  the  profit, 
or  in  other  words,  the  interest,  it  might  earn,  in  the  character  of  a 
productive  means.  Wherewith,  then,  is  the  government  to  pay  the 
interest  of  its  debt  ?  Why,  with  a  portion  of  the  revenue  arising 

*  Forbonnois,  Principes  et  Observ.  &c.  torn.  ii.  p.  247. 


478  ON  CONSUMPTION.  BOOK  IIL 

from  some  other  source,  which  it  must  transfer  from  the  tax-payer 
to  the  public  creditor  for  the  purpose. 

Before  the  act  of  borrowing,  there  will  have  been  in  existence 
two  productive  capitals,  each  of  them  yielding,  or  capable  of  yield- 
ing, revenue ;  that  is  to  say,  a  capital  about  to  be  lent  to  government, 
and  a  capital  whereon  the  future  tax-payers  derive  that  revenue, 
which  is  about  to  be  applied  in  satisfaction  of  the  interest  upon  the 
capital  lent.  After  the  act  of  borrowing,  there  will  remain  but  one 
of  these  capitals ;  viz.  the  latter  of  the  two,  whereof  the  revenue  is 
thenceforward  no  longer  at  the  disposal  of  its  former  possessors, 
the  present  tax-payers,  since  it  must  be  taken  in  some  form  of  tax- 
ation or  other  by  the  government,  for  the  sake  of  providing  the 
payment  of  interest  to  its  creditors.  The  lender  loses  no  part  of 
his  revenue :  the  only  loser  is  the  payer  of  taxes. 

People  are  apt  to  suppose,  that,  because  national  loans  do  not 
necessarily  occasion  any  diminution  of  the  national  money  or  specie, 
therefore,  they  occasion,  not  a  loss  but  merely  a  transfer,  of  national 
wealth.  With  a  view  to  the  more  ready  exposure  of  this  fallacy,  I 
have  subjoined  a  synoptical  table,  showing  what  becomes  of  the  sum 
borrowed,  and  whence  the  public  creditor's  interest  is  satisfied.* 

When  a  government  borrows,  it  either  does  or  does  not  engage 
to  repay  the  principal.  In  the  latter  case,  it  grants  what  is  called 
a  perpetual  annuity.  Redeemable  loans  are  capable  of  infinite 
variety  in  the  terms.  The  principal  is  contracted  to  be  repaid, 
sometimes  gradually,  and  in  the  way  of  lottery ;  sometimes  by  instal- 
ments payable  together  with  the  interest,  sometimes  in  the  way  of 
increased  interest,  with  condition  to  expire  on  the  death  of  the 
lender ;  as  in  the  case  of  tontines  and  life-annuities,  whereof  the 
latter  determine  on  the  death  of  the  individual  lender ;  whereas,  in 
tontines,  the  full  interest  continues  to  be  divided  amongst  the  sur- 
vivors, until  the  whole  of  the  lives  have  expired. 

Tontines  and  life-annuities  are  very  improvident  modes  of  bor- 
rowing ;  for  the  borrower  remains  throughout  liable  to  the  full  rate 
of«  interest,  although  he  annually  repays  a  part  of  the  principal 
Besides,  they  savour  of  immorality ;  offering  a  premium  to  egotism, 
and  a  stimulus  to  the  dilapidation  of  capital,  by  enabling  the  lender 
to  consume  both  principal  and  interest  without  fear  of  personal 
beggary. 

The  governments  best  acquainted  with  the  business  of  borrowing 
and  lending  have  not,  of  late  years  at  least,  given  any  engagement 
to  repay  the  principal  of  the  loan.  Thus,  public  creditors  have  no 
other  way  of  altering  the  investment  of  their  capital,  except  by 
selling  their  transferable  security,  which  they  can  do  with  more  or 
less  advantage  to  themselves,  according  to  the  buyer's  opinion  of 
the  solidity  of  the  debtor  government,  that  has  granted  the  perpetual 
annuity,  f  Despotic  governments  have  always  found  a  great  diffi- 

*  Vide  App.  A. 

\  In  tne  next  section  it  will  be  explained  how  an  unredeemable  debt  may  be 
evtinjruished  by  purchase  at  the  market  price. 


CHAP.  IX.  ON  CONSUMPTION.  479 

culty  in  negotiating  such  loans.  Where  the  sovereign  is  powerful 
enough  to  violate  his  contracts  at  pleasure,  or  where  there  is  a  mere 
personal  contract  with  the  reigning  monarch,  with  a  risk  of  dis- 
avowal by  the  successor,  lenders  are  loth  to  advance  their  money, 
without  a  near  and  definite  period  of  payment. 

The  appointment  to  posts  and  offices,  under  condition  of  an  annual 
payment,  or  of  deposit  for  which  the  government  engages  to  pay 
interest,  is  a  mode  of  borrowing  in  perpetuity,  in  which  the  loan  is 
compulsory.  When  once  this  paltry  expedient  is  resorted  to,  it  re- 
quires very  little  ingenuity  to  find  plausible  grounds,  for  converting 
almost  every  occupation,  down  to  the  dust-man  and  street-porter, 
into  patent  and  saleable  offices. 

Another  mode  of  borrowing  is,  by  the  anticipation  of  revenue , 
by  which  is  meant,  the  assignment  by  a  government  of  revenues  not 
yet  due,  with  allowance  in  the  nature  of  discount,  the  taking  up  mo- 
ney in  advance  from  lenders,  who  charge  a  discount  proportionate 
to  the  risk  they  run  from  the  instability  of  the  government  and  pos- 
sible deficiency  of  the  revenue.  Engagements  of  this  kind  contract- 
ed by  a  government,  and  satisfied  either  out  of  the  revenue  when 
collected,  or  by  the  issue  of  fresh  bills  upon  the  public  treasury,  con- 
stitute what  bears  the  uncouth  English  denomination  of  foaling  debt ; 
the  consolidated  debt  being  that,  whereon  the  creditor  can  demand 
the  interest  only,  and  not  the  principal. 

National  loans  of  every  kind  are  attended  with  the  universal  dis- 
advantage of  withdrawing  capital  from  productive  employment,  and 
diverting  it  into  the  channel  of  barren  consumption ;  and,  in  coun- 
tries wherq  the  credit  of  the  government  is  at  a  low  ebb,  with  the 
further  and  particular  disadvantage,  of  raising  the  interest  of  capital. 
Who  can  be  expected  to  lend  at  5  per  cent,  to  the  farmer,  the  manu- 
facturer, or  the  merchant,  while  he  can  readily  get  an  offer  of  7  or 
8  per  cent,  from  the  government?'  That  class  of  revenue  which  has 
been  called,  profit  of  capital,  is  thereby  advanced  in  its  ratio,  at  the 
expense  of  the  consumer:  the  consumption  falls  off,  in  consequence 
of  the  advance  in  the  real  price  of  products ;  the  productive  agency 
of  the  other  sources  of  production  are  less  in  demand,  and  conse- 
quently worse  paid ;  and  the  whole  community  is  the  sufferer,  with 
the  sole  exception  of  the  capitalist. 

The  ability  to  borrow  affords  one  main  advantage  to  the  state, 
namely,  the  power  of  apportioning  the  burthen  entailed  by  a  sudden 
emergency  among  a  great  number  of  successive  years.  In  the  pre- 
sent state  of  public  affairs,  and  on  the  present  scale  of  international 
warfare,  no  country  could  support  the  enormous  expense  from  its 
ordinary  annual  revenue.  The  larger  states  pay  in  taxation  nearly 
as  much  as  they  are  able ;  for  economy  is  by  no  means  the  order  of 
the  day  with  them;  and  their  ordinary  expenditure  seldom  falls 
much  short  of  the  income.  If  the  expenditure  must  be  doubled  to 
save  the  nation  from  ruin,  borrowing  is  usually  the  only  resource 
unless  it  can  make  up  its  mind  to  violate  all  subsisting  engagements 
and  be  guilty  of  spoliation  of  its  own  subjects  and  foreigners  too 


480  ON  CONSUMPTION.  BOOK  III. 

The  faculty  of  borrowing  is  a  more  powerful  agent,  than  even  gun- 
powder ;  but  probably  the  gross  abuse  that  is  made  of  it,  will  soon 
destroy  its  efficacy. 

Great  pains  have  been  taken,  to  find  in  the  system  of  borrowing, 
as  well  as  in  taxation,  some  inherent  advantage  beyond  that  of  sup- 
plying the  public  consumption.  But  a  close  examination  will  expose 
the  hopelessness  of  such  an  attempt. 

It  iias  been  maintained,  for  instance,  that  the  debentures  and  secu- 
rities, which  form  a  national  debt,  become  real  and  substantial 
values,  existing  within  the  community ;  that  the  capital,  of  which 
they  are  the  evidence  or  representative,  is  so  much  positive  wealth, 
and  must  be  reckoned  as  an  item  of  the  total  substance  of  the  nation.* 
But  it  is  not  so ;  a  written  contract  or  security  is  a  mere  evidence, 
that  such  or  such  property  belongs  to  such  an  individual.  But 
wealth  consists  in  the  property  itself,  and  not  in  the  parchment,  by 
which  its  ownership  is  evidenced ;  therefore  ct  fortiori,  a  security  is 
not  even  an  evidence  of  wealth,  where  it  does  not  represent  an 
actual  existing  value,  and  when  it  operates  as  a  mere  power  of  at- 
torney from  the  government  to  its  creditor,  enabling  him  to  receive 
annually  a  specified  portion  of  the  revenue  expected  to  be  levied  upon 
the  tax-payers  at  large.  Supposing  the  security  to  be  cancelled,  as 
it  might  be  by  a  national  bankruptcy,  would  there  be  any  the  least 
diminution  of  wealth  in  the  community  ?  Undoubtedly  not.  The 
only  difference  would  be,  that  the  revenue,  which  before  went  to  the 
public  creditor,  would  now  be  at  the  disposal  of  the  tax-payer,  from 
whom  it  used  to  be  taken. 

Those  who  tell  us,  that  the  annual  circulation  is  increased  by  the 
whole  amount  of  the  annual  disbursements  of  the  government,"! 
forget  that  these  disbursements  are  made  out  of  the  annual  products 
and  are  a  portion  of  the  annual  revenue,  taken  from  the  tax-payer, 
which  would  have  been  brought  into  the  general  circulation  just  the 
same,  although  no  such  thing  as  national  debt  had  existed.  The 
tax-payer  would  have  spent  what  is  now  spent  by  the  public  credit- 
or*; that  is  all. 

The  sale  or  purchase  of  debentures  or  securities  is  not  a  produc- 
tive circulation,  but  a  mere  substitution  of  one  public  creditor  in 
place  of  another.  When  these  transfers  degenerate  into  stock-job- 
bing, that  is  to  say,  the  making  of  a  profit  by  the  rise  and  fall  ol 
their  price,  they  are  productive  of  much  mischief;  in  the  first  place, 
by  the  unproductive  employment  on  this  object  of  the  agent  of  cir- 
culation, money,  which  is  an  item  of  the  national  capital ;  and,  in  the 

*  Considerations  sur  les  Advantages  del"1  Existence  ffunc.  Dette  publiquf,p.  8. 

f  The  transferable  nature  of  these  securities  does  not  invest  them  with  the 
properties  of  money,  since  they  do  not  act  in  that  capacity.  But  the  use  of  con- 
vertible paper,  as  money,  operates  to  create  a  positive  addition  to  the  total  na 
tional  capital,  because,  but  for  their  agency  in  the  transfer  of  value  in  general 
it  must  be  executed  by  specie,  or  some  equally  substantial  item  of  capital.  Go 
vernmen*  debentures  of  stock  require  money  to  circulate  them,  instead  of  acting 
themselves  as  money. 


CHAP  IX.  ON  CONSUMPTION.  481 

next,  by  procuring  a  gain  to  one  person  by  the  loss  of  another ; 
which  is  the  characteristic  of  all  gaming.  The  occupation  of  the 
stock-jobber  yields  no  new  or  useful  product;  consequently  having 
no  product  of  his  own  to  give  in  exchange,  he  has  no  revenue  to 
subsist  upon,  but  what  he  contrives  to  make  out  of  the  unskilfulness 
or  ill-fortune  of  gamesters  like  himself. 

A  national  debt  has  been  said  to  bind  the  public  creditors  more 
firmly  to  the  government,  and  make  them  its  natural  supporters  by 
a  sense  of  common  interest;  and  so  it  does,  beyond  all  doubt.  But, 
as  this  common  interest  may  attach  equally  to  a  bad  or  a  good  go- 
vernment, there  is  just  as  much  chance  of  its  being  an  injury,  as  a 
benefit  to  a  nation.  If  we  look  at  England,  we  shall  see  a  vast  num- 
ber of  well-meaning  persons,  induced  by  this  motive  to  uphold  the 
abuses  and  misgovernment  of  a  wretched  administration. 

It  has  been  further  urged,  that  a  national  debt  is  an  index  of  the 
public  opinion,  respecting  the  degree  of  credit  which  the  government 
deserves,  and  operates  as  a  motive  to  its  good  conduct,  and  endea- 
vours to  preserve  the  public  opinion,  of  which  such  a  debt  furnishes 
the  index.  This  can  not  be  admitted  without  some  qualification. 
The  good  conduct  of  government  in  the  eyes  of  the  public  creditors, 
consists  in  the  regular  payment  of  their  own  dividends ;  but  in  the 
eyes  of  the  tax-payers,  it  consists  in  spending  as  little  as  possible. 
The  market-price  of  stock  does,  indeed,  furnish  a  tolerable  index  of 
the  former  kind  of  good  conduct,  but  not  of  the  latter.  Perhaps  it 
would  be  no  exaggeration  to  say,  that  the  punctual  payments  of  the 
dividends,  instead  of  being  a  sign  of  good,  is  in  numberless  instances 
a  cloak  to  bad,  government ;  and,  in  some  countries,  a  boon  for  the 
toleration  of  frequent  and  glaring  abuses. 

Another  argument  in  favour  of  national  debt  is,  that  it  affords  a 
prompt  investment  to  capital,  which  can  find  no  ready  and  profitable 
employment,  and  thus  must,  at  any  rate,  prevent  its  emigration.  If 
it  do,  so  much  the  worse :  it  is  a  bait  to  tempt  capital  towards  its 
destruction,  leaving  the  nation  burthened  with  the  annual  interest, 
which  government  must  provide.  It  is  far  better  that  the  capital 
should  emigrate,  as  it  would  probably  return  sooner  or  later :  and 
then  its  interest  for  the  mean  time  will  be  chargeable  to  foreigners. 
A  national  debt  of  moderate  amount,  the  capital  of  which  should 
have  been  well  and  judiciously  expended  in  useful  works,  might 
indeed  be  attended  with  the  advantage  of  providing  an  investment 
for  minute  portions  of  capital,  in  the  hands  of  persons  incapable  of 
turning  them  to  account,  who  would  probably  keep  'hem  locked  up, 
or  spend  them  by  driblets,  but  for  the  convenience  of  such  an  invest- 
ment. This  is  perhaps  the  sole  benefit  of  a  national  debt;  and  even 
this  is  attended  with  some  danger  ;  inasmuch  as  it  enables  a  govern- 
ment  to  squander  the  national  savings.  For,  unless  the  principal  be 
spent  upon  objects  of  permanent  public  benefit,  as  on  roads,  canals. 
or  the  like,  it  were  better  for  the  public,  that  the  capital  should  re- 
main  inactive,  or  concealed  ;  since,  if  the  public  lost  the  use  of  it,  ai 
least  it  would  not  have  to  pay  the  interest. 
41  3L 


482  ON  CONSUMPTION.  BOOK  III. 

Thus,  it  may  be  expedient  to  borrow,  when  capital  must  be  spent 
by  a  government,  having  nothing  but  the  usufruct  at  its  command 
but  we  are  not  to  imagine,  that,  by  the  act  of  borrowing,  the  pub'ic 
prosperity  can  be  advanced.  The  borrower,  whether  a  sovereign, 
or  an  individual,  incurs  an  annual  charge  upon  his  revenue,  besides 
impoverishing  himself  to  the  full  amount  of  the  principal,  if  it  be 
consumed;  and  nations  never  borrow  but  with  a  view  to  consume 
outright. 


SECTION  II. 
Of  public  Credit,  its  Basis,  and  the  Circumstances  that  endanger  its  Solidity. 

Public  credit  is  the  confidence  of  individuals  in  the  engagements 
of  the  "ruling  power,  or  government.  This  credit  is  at  the  extreme 
point  of  elevation,  when  the  public  creditor  gets  no  higher  interest, 
than  he  would  by  lending  on  the  best  private  securities;  which  is  a 
clear  proof,  that  the  lenders  require  no  premium  of  insurance  to 
cover  the  extra  risk  they  incur,  and  that  in  their  estimation  there  is 
no  such  extra  risk.  Public  credit  never  reaches  this  elevation,  ex- 
cept where  the  government  is  so  constituted,  as  to  find  great  diffi- 
culty in  breaking  its  engagements,  and  where,  moreover,  its  re- 
sources are  known  to  be  equal  to  its  wants ;  for  which  latter  reason, 
public  credit  is  never  very  high,  unless  where  the  financial  accounts 
of  the  nation  are  subject  to  general  publicity. 

Where  the  public  authority  is  vested  in  a  single  individual,  it  is 
next  to  impossible,  that  public  credit  should  be  very  extensive :  for 
there  is  no  security,  beyond  the  pleasure  and  good  faith  of  the 
monarch.  When  the  authority  resides  in  the  people,  or  its  repre- 
sentatives, there  is  the  further  security  of  a  personal  interest  in  the 
people  themselves,  who  are  creditors  in  their  individual,  and  debtors 
in  their  aggregate  character ;  and  therefore,  can  not  receive  in  the 
former,  without  paying  in  the  latter.  This  circumstance  alone 
would  lead  us  to  presume,  that  now,  when  great  undertakings  are 
BO  costly  as  to  be  effected  by  borrowing  alone,  representative  go- 
vernments will  acquire  a  marked  preponderance  in  the  scale  of 
national  power,  simply  on  account  of  their  superior  financial  re- 
sources, without  reference  to  any  other  circumstance. 

In  one  light,  the  obligations  of  government  inspire  more  confi- 
dence than  those  of  individuals,  that  is  to  say,  by  the  greater  solidity 
of  its  resources.  Tne  resources  of  the  most  responsible  individual 
may  fail  suddenly  and  totally,  or  at  least  to  such  an  extent,  as  to 
disable  him  from  performing  his  engagements. 

Numerous  commercial  failures,  political  or  national  calamities, 
litigation,  fraud  or  violence,  may  ruin  him  entirely;  but  the  sup- 
plies of  a  government  are  derived  from  such  various  quarters,  that 
the  individual  calamities  of  its  subjects  can  operate  but  partially  upon 


CHAP.  IX.  ON  CONSUMPTION.  483 

the  revenue  of  the  state.  There  is  also  another  thing,  that  facilitates 
the  borrowing  of  government  even  more  than  the  credit  it  is  fairly 
entitled  to ;  and  that  is,  the  great  facility  of  transfer  presented  to  the 
stockholder.  Public  creditors  always  reckon  upon  the  possibility  of 
withdrawing  by  the  sale  of  their  debentures,  before  the  occurrence 
of  embarrassment  or  bankruptcy;  and,  even  where  they  contemplate 
such  a  risk,  generally  consider  some  advance  of  the  rate  of  interest 
a  sufficient  premium  of  insurance  against  it 

Moreover,  it  is  observable,  that  the  sentiments  of  lenders  and 
indeed  of  mankind  upon  all  occasions,  are  more  powerfully  operated 
upon  by  the  impressions  of  the  moment,  than  by  any  other  motive; 
experience  of  the  past  must  be  very  recent,  and  the  prospect  of  the 
future  very  near,  to  have  any  sensible  effect.  The  monstrous  breach 
of  faith  on  the  part  of  the  French  government  in  1721,  in  regard  to 
its  paper-money  and  the  Mississippi  share-holders,  did  not  prevent 
the  ready  negotiation  of  a  loan  of  200,000,000  liv.  in  1759;  nor  did 
the  bankrupt  measures  of  the  Abbe  Terrai  in  1772  prevent  the 
negotiation  of  fresh  loans  in  1778  and  every  subsequent  year. 

In  other  points  of  view,  the  credit  of  individuals  is  better  founded 
than  that  of  the  government.  There  is  no  compulsory  process 
against  the  latter,  for  the  breach  of  its  engagements;  nor  do  govern- 
ments ever  husband  the  national  resources  with  nearly  the  care  and 
attention  of  individuals.  Besides,  in  the  event  of  external  or  internal 
subversion,  individuals  may  withdraw  their  property  from  the  wreck 
much  better  than  governments  can. 

Public  credit  affords  such  facilities  to  public  prodigality,  that 
many  political  writers  have  regarded  it  as  fatal  to  national  pros- 
perity. For,  say  they,  when  governments  feel  themselves  strong  in 
the  ability  to  borrow,  they  are  too  apt  to  intermeddle  in  every 
political  arrangement,  and  to  conceive  gigantic  projects,  that  lead 
sometimes  to  disgrace,  sometimes  to  glory,  but  always  to  a  state  of 
financial  exhaustion;  to  make  war  themselves,  and  stir  up  others 
to  do  the  like;  to  subsidize  every  mercenary  agent,  and  deal  in  the 
blood  and  the  consciences  of  mankind  ;  making  capital,  which  should 
be  the  fruit  of  industry  and  virtue,  the  prize  of  ambition,  pride,  and 
wickedness. 

A  nation,  which  has  the  power  to  borrow,  and  yet  is  in  a  state  of 
political  feebleness,  will  be  exposed  to  the  requisitions  of  its  more 
powerful  neighbours.  It  must  subsidize  them  in  its  defence;  must 
purchase  peace ;  must  pay  for  the  toleration  of  its  independence, 
which  it  generally  loses  after  all ;  or  perhaps  must  lend,  with  the 
certain  prospect  of  never  being  repaid. 

These  are  by  no  means  hypothetical  cases :  but  the  reader  is  left 
to  make  the  application  himself. 

By  the  establishment  of  sinking-funds,  well-ordered  governments 
have  found  means  to  extinguish  and  discharge  their  redeemable 
debt.  The  constant  operation  of  this  contrivance  contributes  more 
than  any  thing  else  to  the  consolidation  of  public  credit  The  mode 
of  proceeding  is  simply  this: 


484  ON  CONSUMPTION.  BOOK  III 

Suppose  that  the  state  borrows  100  millions  of  dollars  at  an  in- 
terest of  5  per  cent. ;  to  pay  that  interest,  it  must  appropriate  a  portion 
of  the  national  revenue  to  the  amount  of  5  millions  of  dollars.  For 
this  purpose,  it  usually  imposes  a  tax  calculated  to  produce  this 
sum  annually.  If  the  tax  be  made  to  produce  somewhat  more,  say 
5,462,400  dollars,  and  the  surplus  of  462,400  dollars  be  thrown  into 
a  particular  fund,  and  laid  out  annually,  in  the  purchase  of  govern- 
ment debentures  to  that  amount  in  the  market,  and  if,  moreover,  in 
addition  to  this  surplus,  the  interest  likewise  upon  the  debt  thus 
extinguished,  be  annually  employed  in  such  purchases,  the  whole 
principal  debt  wrill  be  extinguished  at  the  end  of  fifty  years.  This 
is  the  mode  in  which  a  sinking-fund  operates.  The  efficacy  of  this 
expedient  depends  upon  the  progressive  power  of  compound  in- 
terest; that  is  to  say,  the  gradual  augmentation  of  the  interest  of 
capital,  by  the  addition  of  interest  upon  the  arrears  of  interest, 
reckoned  from  certain  stated  periods. 

It  is  obvious,  that,  by  an  annual  instalment  of  not  more  than  10 
per  cent,  upon  its  own  interest,  the  principal  of  a  debt  bearing  an 
interest  of  5  per  cent,  may  be  extinguished  in  less  than  50  years. 
However,  the  sale  of  the  debentures  being  voluntary,  if  the  holders 
will  not  sell  at  par,  that  is  to  say,  at  20  years  purchase,  the  redemp- 
tion, in  this  way,  will  take  somewhat  longer  time ;  but  this  very 
state  of  the  market  will  be  a  convincing  proof  of  the  high  ratio  of 
national  credit.  On  the  other  hand,  if  the  credit  decline,  so  that  the 
same  sum  will  purchase  a  larger  amount  of  debentures,  the  extinc- 
tion of  the  debt  will  be  effected  in  a  shorter  period.  So  that  the 
lower  public  credit  falls,  the  more  powerful  is  the  operation  of  a 
sinking-fund  to  revive  it;  and  that  fund  grows  less  efficient,  exactly 
in  proportion  as  it  becomes  less  requisite. 

To  the  establishment  of  such  a  fund,  has  the  long-continued  public 
credit  of  Great  Britain  been  attributed,  and  her  ability  still  to  go  on 
borrowing,  in  spite  of  a  debt  of  more  than  800  millions  sterling.  (1) 

(1)  In  a  note,  here  subjoined,  the  author  stated  the  amount  of  the  British  na- 
tional debt,  in  the  year  1815,  on  the  authority  of  a  speech  made  in  parliament 
in  February,  of  that  year,  by  the  chancellor  of  the  exchequer,  Mr.  Vansittart. 
We  now  have  it  in  our  power,  in  place  of  the  note  in  question,  to  furnisli  the 
reader  with  an  exact  statement  of  the  British  national  debt,  from  its  commence- 
ment, at  the  revolution  of  1G88,  to  the  5th  of  January,  1832.     The  abstract  we 
give  is  extracted  from  the  Tables  to  Part  II.  of  "  Pebrer  on  the  Taxation,  Debt, 
Capital,  Resources,  &,c.  of  the  whole  British  Empire,"  a  work  which  we  before 
had  occasion  to  refer  to,  and  of  the  highest  statistical  authority. 

Pounds  sterling. 
National  debt  at  the  revolution,  1688,    --------         664,263 

Increase  during  the  reign  of  William  and  Mary,      -    -    -    -    15,730,439 

Debt  at  accession  of  Anne,  1702, 16,394,702 

Increase  during  reign  of  Anne,     -.-.-.----     37,750,661 


Debt  at  accession  of  George  I.,  1714, 54,145,363 

Oecrease  during  reign  of  George  I.,      ....-'-.-      2,053,128 


CHAP.  IX.  ON  CONSUMPTION.  485 

And  doubtless  this  it  is,  that  has  made  Smith  declare  sinking-funds, 
which  were  contrived  expressly  to  reduce  national  debt,  the  main 
instruments  of  their  increase.  Had  not  governments  the  happy 
knack  of  abusing  resources  of  every  kind,  they  would  soon  grow 
too  rich  and  powerful. 

A  sinking-fund  is  a  complete  delusion,  whenever  a  government 
continues  borrowing  on  one  hand,  as  much  as  it  redeems  on  the 
other;  and  &  fortiori,  when  it  borrows  more  than  it  redeems,  as 
England  has  constantly  done,  since  the  year  1793  to  the  present 
time.  Whencesoever  the  amount  of  the  sinking-fund  be  derived, 
whether  it  be  merely  the  product  of  a  fresh  tax,  or  that  product, 
augmented  by  the  interest  on  the  extinguished  debt,  if  the  govern- 
ment borrow  a  million  for  every  million  of  debt  that  it  pays  off,  it 
creates  an  annual  charge  of  precisely  the  same  amount  as  that  ex- 
tinguished :  it  is  precisely  the  same  thing,  as  lending  to  itself  the 
million  devoted  to  the  purpose  of  redemption.  Indeed,  the  latter 
course  would  save  the  expense  of  the  operation.  This  position  has 
been  fully  established  in  an  excellent  work,  by  professor  Hamilton,* 
which  is  quite  conclusive  upon  the  subject.  The  enormous  burthens 

*  On  the  National  Debt  of  Great  Britain.     8vo.,  Edinburgh,  1813. 

Debt  at  accession  of  George  II.,  1727, 52,092,235 

Decrease  during  the  peace,  -----------        5,137,612 

Debt  at  commencement  of  Spanish  war,  1739,      -    ...      46,954,623 
Increase  during  the  war,  - 31,338,689 

Debt  at  end  of  Spanish  war,  1748, 78,293,312 

Decrease  during  the  peace,   -----------        3,721,472 

Debt  at  commencement  of  war,  1755,      -------      74,571,840 

Increase  during  the  war,  ------------      72,111,004 

Debt  at  conclusion  of  the  peace,  1762, 146,682,844 

Decrease  during  the  peace,  -----------      10,739,793 

Debt  at  commencement  of  American  war,  1776,    -    -    -    -    135,943,051 
Increase  during  the  war,  ------------    102,541,819 

Debt  at  conclusion  of  American  war,  1783,      -----    238,484,870 
Decrease  during  the  peace,   -----------        4,751,261 

Debt  at  commencement  of  French  revolutionary  war,  1793,    233,733,609 
Increase  during  the  war,  ------------    295,105,668 

Debt  at  peace  of  Amiens,  1st  February,  1801, 528,839.277 

Increase  during  the  second  war, .---    335,983,164 

Debt  at  peace  of  Paris,  1st  February,  1816, 864,822,441 

Decrease  since  the  poace,      -----------      82,155,207 

Debt  on  5th  January,  1832,     -    -  £782,667,234 

Equal  to  3,756,802,723  dollars.  • 

AMERICAN  EDITOR. 

41 » 


486  ON  CONSUMPTION.  BOOK  lit 

of  the  people  of  England,  the  scandalous  abuse  its  government  has 
made  of  the  power  of  borrowing,  and  her  substitution  of  paper-mo- 
ney in  place  of  specie,  will  have  produced  some  benefit  at  least; 
inasmuch  as  they  have  assisted  the  solution  of  many  problems, 
highly  interesting  to  the  happiness  of  nations,  and  given  warning  to 
all  future  generations,  to  beware  of  the  like  excesses. 

It  must  be  evident,  that  the  grand  requisite  to  the  efficiency  of 
a  sinking-fund  is,  the  punctual  and  inviolable  application  of  the  sums 
appropriated  to  the  purpose  of  redemption.  Yet  this  has  never  been 
rigidly  adhered  to,  even  in  England,  where  consistency  and  good 
faith  to  the  creditors  are  a  point  of  honour  with  the  government. 
So  that  English  writers  put  no  faith  in  the  extinction  of  the  debt  by 
the  operation  of  the  sinking-fund :  nay,  Smith  makes  no  scruple  of 
declaring,  that  national  debts  have  never  been  extinguished  except 
by  national  bankruptcy. 

It  has  been  sometimes  a  matter  of  speculation,  to  inquire  into  the 
effect  of  a  national  bankruptcy  upon  the  relative  condition  of  indi- 
viduals, and  the  internal  economy  of  the  nation.  In  ordinary  cases, 
when  a  government  commits  an  act  of  bankruptcy,  it  adds  to  the 
revenues  of  the  tax-payers  the  whole  amount  that  it  discontinues 
paying  to  the  public  creditors. — Nay,  it  goes  somewhat  further :  for 
it  remits  likewise  the  charges  of  collection  and  management  of  the 
revenue  and  the  debt.  A  nation  burthened  with  100  millions  of 
annual  interest  on  its  debt,  whereon  the  charges  above  mentioned 
should  amount  to  30  per  cent.*  more,  might  by  a  bankruptcy  remit 
to  the  tax-payers  130  millions,  while  it  stript  its  creditors  of  100  mil- 
lions only. 

In  England  the  effect  would  be  more  complicated ;  because  she 
does  not  pay  the  dividends  on  her  debt  wholly  out  of  the  annual 
proceeds  of  taxation ;  at  least,  not  at  the  moment  of  my  writing ;  but 
annually  borrows  a  sum  nearly  equal  to  the  interest  of  her  debt.f 
Were  she  to  commit  an  act  of  bankruptcy,  the  annual  loans  of  40 
millions  sterling,  more  or  less,  would  be  withdrawn  from  unproduc- 
tive consumption  by  the  public  creditors,  and  be  applicable  to  the 
purposes  of  re-productive  consumption:  for  it  may  fairly  be  suppos- 
ed, that  the  capitalists  who  accumulate  and  lend  to  the  state,  would 
look  out  for  some  profitable  investment.  In  this  point  of  view,  the 
operation  would  tend  vastly  to  the  increase  of  the  national  capital 
and  revenue :  but  the  execution  would  be  attended  with  very  disas- 
trous immediate  consequences :  for  this  annual  amount  of  40  mil- 
lions would  be  withdrawn  from  the  class  of  consumers,  who  have 
no  other  means  of  subsistence,  and  would  be  utterly  unable  to  make 

*  In  England  and  the  United  States  they  are  not  nearly  so  high  in  proportion . 
out  the  ratio  is  even  higher  in  some  states  that  shall  be  nameless. 

f  Colquhoun,  Wealth,  Power,  and  Resources  of  the  British  Empire,  4to.  Lon- 
don, 1814.  Stokes,  Revenue  and  Expenditure  of  Great  Britain,  London,  1815. 
Should  a  continuance  of  peace  enable  her  to. square  her  income  with  her  annual 
expenditure,  inclusive  of  the  interest  of  her  debt,  it  would  still  afford  no  relief, 
out  merely  arrest  the  further  progress  of  the  evil. 


CHAP.  IX.  ON  CONSUMPTION.  437 

good  their  losses  in  any  other  way,  for  want  of  both  personal  indus- 
try, and  of  the  command  of  capital. 

A  bankruptcy  would  probably  obviate  the  necessity  of  fresh  loans ; 
but  would  not  release  an  atom  of  the  former  taxation,  where  the 
interest  of  the  debt  is  habitually  paid,  not  with  the  proceeds  of  tax- 
ation, but  with  new  loans.  Thus,  the  burthens  of  the  people  would 
not  be  alleviated,*  nor  the  charges  of  production  reduced:  conse- 
quently there  would  be  no  sensible  reduction  in  the  price  of  commo- 
dities ;  nor  would  British  products  find  a  readier  market  either  at 
home  or  abroad. 

The  classes  liable  to  taxation  would  be  diminished  in  numerical 
strength,  by  the  whole  of  the  suppressed  stockholders ;  and  taxation 
less  productive,  although  not  lower  in  ratio.  The  40  millions  of 
revenue,  withdrawn  from  the  public  creditors,  would  pay  taxes  only 
upon  the  annual  profit  or  revenue,  they  might  yield  in  the  character 
of  productive  capital.  The  ruin  of  the  public  creditors  would  be 
attended  with  abundance  of  collateral  distress ;  with  private  failures 
and  insolvency  without  end;  with  the  loss  of  employment  to  aU 
their  tradesmen  and  servants,  and  the  utter  destitution  of  all  their 
dependants. 

On  the  other  hand,  if  she  persevere  in  borrowing  to  pay  the  inter- 
est of  the  former  loans,  that  interest  and  with  it  taxation  also,  must 
go  on  increasing  to  infinity.  It  is  impossible  to  avoid  a  precipice, 
when  one  follows  a  road  that  leads  nowhere  else. 

The  potentates  of  Asia,  and  all  sovereigns,  who  have  no  hopes  of 
establishing  a  credit,  have  recourse  to  the  accumulation  of  treasure. 
Treasure  is  the  reserve  of  past,  whereas  a  loan  is  the  anticipation  of 
future  revenue.  They  are  both  serviceable  expedients  in  case  of 
emergency. 

A  treasure  does  not  always  contribute  to  the  political  security  of 
its  possessors.  It  rather  invites  attack,  and  very  seldom  is  faithfully 
applied  to  the  purpose  for  which  it  was  destined.  The  accumula- 
tion of  Charles  V.  of  France  fell  into  the  hands  of  his  brother,  the 
duke  of  Anjou ;  those  which  pope  Paul  II.  destined  to  oppose  the 
Turkish  arms,  and  drive  them  out  of  Europe,  supplied  the  extrava- 
gancies of  Sixtus  IV.  and  his  nephews.  The  treasures  amassed  by 
Henry  IV.,  for  the  humiliation  of  the  house  of  Austria,  were  lavish- 
ed upon  the  favourites  of  the  queen-mother :  and,  at  a  later  period, 
we  have  seen  the  political  power  of  Prussia  brought  into  imminent 
hazard  by  those  very  savings,  which  were  destined  by  Frederick 
III.  to  its  consolidation. 

The  command  of  a  large  sum  is  a  dangerous  temptation  to  a 
national  administration.  Though  accumulated  at  their  expense,  the 
people  rarely,  if  ever  profit  by  it :  yet  in  point  of  fact,  all  value,  and 
consequently,  all  wealth,  originates  with  the  people. 

*  Economy  in  the  national  expenditure  is  the  only  thing  that  can  mitigate  the 
pressure  of  taxation  upon  the  British  nation ;  yet  were  economy  enforced,  how 
is  that  system  of  corruption  to  be  upheld,  through  which  the  interest  of  the  min- 
ister of  the  day  regularly  prevails  over  that  of  the  nation1 


488 


APPENDIX. 


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